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Warren buffet berkshire hathway profits double { March 6 2004 }

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Berkshire Hathway Profit Doubles
March 06, 2004 9:21:00 PM ET

By Philip Klein

NEW YORK (Reuters) - Warren Buffett blasted mutual fund companies, attacked greedy chief executives and revealed he was loading up on foreign currency as his holding company, Berkshire Hathaway Inc. (BRKa), said profit nearly doubled in 2003.

The world's second wealthiest person, in his annual letter to shareholders released on Saturday, said by the end of 2003, Berkshire held positions in five foreign currencies totaling $12 billion. Buffett said he began investing in foreign currency for the first time in 2002 as a result of the widening U.S. trade deficit.

``As an American, I hope there is a benign ending to this problem,'' Buffett wrote of the trade gap and weaker dollar. He said this could cause problems that reach ``well beyond currency markets.''

The annual letter of 73-year-old Buffett, who is known as the ``Oracle of Omaha'' for his prescient investment decisions and his hometown, is the most widely anticipated of the year as it is filled with anecdotes, folksy humor as well as commentary on hot-button issues facing corporate America.

This year was no exception, as he called on mutual fund companies and other companies to elect what he called ``truly independent directors'' who look out for shareholders.

``I am on my soapbox now only because the blatant wrongdoing that has occurred has betrayed the trust of so many millions of shareholders,'' Buffett said, referring to the scandals that have roiled the U.S. mutual fund industry. ``Hundreds of industry insiders had to know what was going on, yet none publicly said a word.''


Buffett also criticized the tax policies of the Bush administration, saying they were too favorable to corporate America. He said Berkshire's tax bill was $3.3 billion in 2003.

``We hope our taxes continue to rise in the future -- it will mean we are prospering -- but we also hope that the rest of corporate America antes up along with us,'' said Buffett.

Berkshire, which owns several insurance units and a stable of old economy companies, said it earned $8.15 billion, or $5,309 per share in 2003, compared with $4.29 billion, or $2,795 per share, a year earlier.

``Insurance did well and some of the other businesses had the best years ever,'' said Matt Sauer, a portfolio manager at Oak Value Fund, which has $250 million in assets and lists Berkshire as its largest holding. ``Those were the businesses that benefited from home construction and home remodeling in America.''

Berkshire's building-materials businesses include Acme Brick and Benjamin Moore, the paint company.

Among the dozens of other businesses Berkshire owns are car insurer GEICO, ice cream chain Dairy Queen and apparel maker Fruit of the Loom.

Buffett's investments in foreign currency led to gains as the dollar weakened, and his $8 billion investment in junk bonds in 2002 also paid off, though Buffett, known as a bargain hunter, stopped buying as prices rose.

The sizable profits at Berkshire pumped more money into Buffett's cash war chest, which reached nearly $36 billion by the end of 2003. He remains on the prowl for other investments and possible acquisitions.

Buffett made a fortune investing in the stocks of classic American names such as American Express Co. (AXP), Coca-Cola Co. (KO) and Gillette Co. (G), but for years has shifted his strategy toward buying companies outright as it became more difficult to find undervalued stocks.

In the 1980s, equity holdings were 114 percent of Berkshire's net worth, but that fell to an average of 50 percent in 2000 to 2003, Buffett said.

Nearly all of Buffett's net worth, estimated at $42.9 billion by Forbes magazine, is in Berkshire stock, which he says he never plans to sell.

Berkshire's per share earnings are unusually high because the company has relatively few shares outstanding, and Buffett has never split the company's ``A'' shares. Each ``A'' share closed on Friday on the New York Stock Exchange at $93,600.

2004 Reuters

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