Billionaire Warren Buffet’s investment firm Berkshire Hathaway reported a profit of $4 billion during the financial year of 2018 on the back of a $3 billion loss in food giant Kraft Heinz. This is also the first time a revised accounting standard of mark to market reporting has reflected negatively in the company’s results.
December 2018 was the worst month for stock markets since the Great Depression, which in turn led to Berkshire Hathaway’s record loss. Meanwhile changes in the accounting standards that require companies to report market fluctuations as profits and losses has further exacerbated the figures. However, that will not affect Berkshire Hathaway’s underlying business in the long run.
But what should be Buffet’s biggest concern is not the dip in notional profits but his biggest investment, Apple Inc. Berkshire Hathaway’s owns close to 5.4% of Apple’s stock which is valued at over $40 billion. It makes up 23% of the company’s investments.
Apple, which was once a growth machine, has slowed. The iPhone maker suffered the single biggest loss in six years this January after cutting guidance due to sluggish data from China. Today Apple is valued at $800.16 billion, down by $300 billion from its peak of about $1.1 trillion last year. Meanwhile its star product iPhone has failed to create the buzz it once did, leading investors to worry about Apple’s waning popularity.
Another concern that could potentially plague the ‘Oracle of Omaha’ is the amount of cash that the company has. Berkshire Hathaway is sitting on $112 billion in cash equivalents and another $20 billion in fixed income instruments.
Although the investment firm is looking to deploy the funds, Buffet has mentioned that it has been challenging to find targets that offer good returns.
“The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects,” Buffet wrote in a letter to shareholders.