Buffett goes in to bat for the American Dream

Mar 01, 2016, 19:03

(BRKa.N) told CNBC on Monday that buying IBM (IBM.N) shares could prove a mistake and that he was buying more USA stocks overall since the end of a year ago.

Investors should be sure they understand what companies include when they talk about their earnings because Buffett said executives sometimes try to exclude stock-based compensation or depreciation.

While Buffett snags most of the attention for his mega deals - like the buyout of Precision Castparts - the comment is a reminder of how he's set up Berkshire to have multiple avenues for reinvestment. Of much greater importance to him is the book value of Berkshire Hathaway stock, which was up 6.4% last quarter on a year-over-year basis. Buffett contends, though, that babies born in America today are the luckiest crop in history.

This year, he has pledged to pay $1 million per year for life to any Berkshire Hathaway employee or any employee of its numerous subsidiaries that picks even the first two rounds of the tournament correctly.

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In layman's terms: Berkshire, which operates many organizations under its management, is having a company-wide NCAA Tournament Bracket Challenge.

He said Berkshire's businesses will adapt just as the company did when its original Berkshire Hathaway textile operation failed. The unusually positive message is rooted in the USA economic trends over the last century and the idea that betting against America has never been, and will never be, a good idea.

While Saturday's letter included another shout-out to Jain, Buffett focused on Berkshire's results, some political views and capital deployment plans, rather than succession.

Even though he said the American economy is growing, Buffett nodded toward growing inequality.

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"I don't agree with a lot of his politics, but that's OK", said David Rolfe, who oversees about US$8 billion, including Berkshire shares, as chief investment officer of Wedgewood Partners Inc.

International Business Machines Corp. Buffett has grown his stake through time, but at a slower rate in the past year or more.

And if the past is any guide - a big "if", naturally - then this may be a buying opportunity.

Buffett has long marketed Berkshire as the buyer of choice for families looking to find a permanent home for their businesses.

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Yet over that period, Berkshire's stock has ultimately almost quadrupled in value.