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Buffett says Uncle Sam should take care of less fortunate

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Berkshire operating profit sets record

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Annual meeting shortened

By Jonathan Stempel

NEW YORK, Feb 22 (Reuters) -

Berkshire Hathaway ( BRK/A ) on Saturday reported record

annual profits even while boosting its cash stake to $334.2

billion, as Warren Buffett used his annual shareholder letter to

caution Washington to spend money "wisely" and take care of

those who get "short straws in life."

The 94-year-old Buffett, arguably the world's most famous

investor, also acknowledged his advanced age in the letter,

telling shareholders he now uses a cane and will spend less time

fielding their questions at Berkshire's annual meeting in May.

He nonetheless assured shareholders they would be in good

hands after he turns over the conglomerate's reins to Vice

Chairman Greg Abel, saying the 62-year-old Abel has "vividly

shown his ability" to deploy capital.

Buffett's letter was accompanied by Berkshire's annual

report, where it reported a third straight record annual

operating profit, rising 27% to $47.44 billion.

Net income totaled $89 billion, including gains from

Berkshire's common stock investments such as Apple ( AAPL ) and

American Express.

Berkshire's cash stake reflected high business

valuations and nine straight quarters of the company selling

more stocks than it bought, including Apple ( AAPL ).

"Often, nothing looks compelling; very infrequently we

find ourselves knee-deep in opportunities," Buffett wrote.

AMERICAN MIRACLE

This year is Buffett's 60th at the helm of Berkshire,

which he transformed from a failing textile company into a $1.03

trillion conglomerate with dozens of businesses in insurance,

railroad, energy, industrial, retail and other sectors.

Buffett said his company will continue to prefer owning

equities, primarily U.S. stocks, over cash, adding Berkshire is

"not finished."

But he sent a cautionary message to Washington,

lamenting how capitalism "has its faults and abuses--in certain

respects more egregious now than ever," with malfeasance by

"scoundrels and promoters" in full force.

He also urged lawmakers to help preserve a stable U.S.

dollar, saying "paper money can see its value evaporate if

fiscal folly prevails," and that the United States has in its

history "come close to the edge."

Buffett said long-term success of Berkshire and the

American economy, which he called the "American miracle," has

depended on people's ability to participate. That, he said, is

something Uncle Sam can encourage, or take away.

"Take care of the many who, for no fault of their own,

get the short straws in life," Buffett wrote, addressing the

government. "They deserve better. And never forget that we need

you to maintain a stable currency and that result requires both

wisdom and vigilance on your part."

Cathy Seifert, an analyst at CFRA Research who rates

Berkshire "hold," said: "Talking about the business of America

being messy was his way of addressing the political landscape

and its impact on the macroeconomic environment. He is warning

Washington: Be careful where you tread."

FEWER BUYING OPPORTUNITIES

While Berkshire has not made a major purchase of an

entire company since 2016, Buffett said it is likely to increase

its combined $23.5 billion of investments in five Japanese

trading houses: Itochu ( ITOCF ), Marubeni ( MARUF ), Mitsubishi ( MSBHF )

, Mitsui ( MITSF ) and Sumitomo ( SSUMF ).

But other stocks appear pricey, with the Standard & Poor's

500 hitting a new high on Wednesday and the Nasdaq

just 3% below its December 16 peak.

Berkshire's size also inhibits its shares from trouncing

the indexes as they did decades ago.

The company's stock price has risen 15% in the last year,

while the S&P 500 rose 18%. Over the last decade, Berkshire's

stock price has risen 225%, while the index rose 241% including

dividends and 185% excluding dividends, Reuters data show.

"They will have lots of buying opportunities but Berkshire

will never be the large double-digit compounder it had been,"

said Bill Smead, chief investment office at Smead Capital

Management in Phoenix. "Berkshire will be a solid way of

participating in owning major companies, and avoiding trouble."

At the annual meeting, which tens of thousands of people

attend, Buffett will spend less time on the stage where he, Abel

and Berkshire Vice Chairman Ajit Jain answer shareholder

questions.

Buffett told Fortune magazine last month that he was

still having fun and able to do a few things reasonably well,

while other activities had been "eliminated or greatly

minimized."

The meeting will also not feature the traditional movie

created by Buffett's daughter Susie.

In discussing his age, Buffett said he talks regularly on

Sundays with his 91-year-old sister Bertie, using an

old-fashioned phone.

"We cover the joys of old age and discuss such exciting

topics as the relative merits of our canes," he said. "In my

case, the utility is limited to the avoidance of falling flat on

my face."