Berkshire Hathaway’s annual letter to shareholders is out.
And it seems like Warren Buffett is looking to buy more.
In the letter, Warren Buffett first writes about Berkshire’s newcomer, Precision Castparts Corp., or PCC, noting that it “fits perfectly into the Berkshire model and will substantially increase out normalized per-share earning power.”
Berkshire purchased PCC, the maker of equipment for the aerospace and energy industries, for over $32 billion earlier this year.
But more interestingly, he then immediately goes on to write that Berkshire Hathaway is looking to acquire more.
With the PCC acquisition, Berkshire will own 10 1/4 companies that would populate the Fortune 500 if they were stand-alone businesses. (Our 27% holding of Kraft Heinz is the 1/4). That leaves just under 98% of America’s business giants that have yet to call us. Operators are standing by.
Berkshire Hathaway also makes a ton of smaller acquisitions each year, and Buffet made clear that the firm wants to do a lot more of those, too.
Again, here’s Buffett:
While Charlie and I search for new businesses to buy, our many subsidiaries are regularly making bolt-on acquisitions. Last year we contracted for 29 bolt-ons, scheduled to cost $634 million in aggregate. The cost of these purchases ranged from $300,000 to $143 million.
Charlies and I encourage bolt-ons, if they are sensibly-priced. (Most deals offered us most definitely aren’t.) These purchases deploy capital in operations that fit with out existing businesses and that will be managed by our corps of expert managers. That means no additional work for us, yet more earnings for Berkshire, a combination we find highly appealing. We will make many dozens of bolt-on deals in future years.
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