Buffett said in the annual letter that companies broadly are highly valued - that is, expensive - by normal standards. Unlike many tech conglomerates, which had parked their cash overseas, Berkshire Hathaway's cash was in America.
Buffett said Berkshire Hathaway is a big beneficiary of corporate tax reform. "That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high". The two main contenders right now are Greg Abel, who heads Berkshire's non-insurance operations, and Ajit Jain, head of the company's insurance group.
"The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own", he wrote in the annual letter.
Buffett says it's important for people to invest money regularly regardless of the market's ups and downs, but watch out for investment fees. Buffett often invests in stocks when he can not find whole companies to buy.
It has been more than two years since Buffett made a major purchase, the $32.1 billion takeover of aircraft parts maker Precision Castparts Corp, and his advancing age gives him less time to find more of the "elephants" he prefers.
The lower tax rate also contributed to a 23% full-year boost in Berkshire's book value, which measures assets minus liabilities and which Buffett considers a good indicator of Berkshire's net worth, to $211,750 per class A share. "Early in 2018, Berkshire's board elected Ajit Jain and Greg Abel as directors of Berkshire and also designated each as vice-chairman".
At year-end past year Berkshire Hathaway had $116 billion in cash and short-term Treasury bills compared to $86.4 billion at the end of 2016, the letter revealed. Buffett and Vice Chairman Munger will focus on investments and capital allocation.
Both are considered candidates to eventually replace Buffett, 87, as Berkshire's chief executive. "Often, high-grade bonds in an investment portfolio increase its risk".
"Berkshire's blood flows through their veins", Buffett wrote. Operating profit, however, fell 18 percent to $14.46 billion, hurt by a rare loss from insurance underwriting.
Buffett also said that while Berkshire's insurance holdings would take a $2 billion after-tax hit from losses caused by hurricanes past year in Florida, Texas and Puerto Rico, other reinsurance companies did far worse.
Even so, insurance float, or premiums collected before claims are paid, and which give Buffett more money to invest, rose 25 percent previous year, to $114.5 billion.