Why Warren Buffett still has an itchy trigger finger

He may be the wrong side of 80, but the Sage of Omaha reckons there are too many good opportunities out there for him to retire...

by James Taylor
Last Updated: 19 Aug 2013
There are lots of economic pessimists out there at the moment, but Warren Buffett clearly isn't one of them. The octogenarian super-investor struck a bullish tone in his annual letter to his Berkshire Hathaway shareholders, suggesting a recovery was just around the corner and declaring that he's planning to spend some serious money this year. But although it's good to see Buffett still so full of energy and optimism - particularly since his fund actually under-performed the market for once last year - he's going to have to address the thorny issue of his succession at some point...

By Buffett's standards, last year wasn't a stellar one. Although profits jumped 43% to $4.38bn, boosted by a $2bn contribution from his new railroad Burlington Northern Santa Fe, the Sage reckons this is pretty meaningless as a way to understand the group's performance. The measure he prefers to use (book value per A share) saw a 13% rise, which is about 2% less than you would have got from investing in the S&P 500 (though he's still up for the last five years as a whole, as he was quick to point out). He had to write off the value of 3% of his bond portfolio, and suffered nearly $2bn in equity impairments (including losses on Irish banks).

However, Buffett isn't buying all this doom and gloom-mongering. 'Money will always flow toward opportunity, and there is an abundance of that in America,' he told shareholders. Urging them to ignore the 'prophets of doom', he suggested the housing market would start to recover 'within a year or so'. And he's planning to put his money where his mouth is: he's pencilled in a record $8bn for capital expenditure in 2011, and is on the look-out for some major acquisitions with the $38bn cash that's currently burning a hole in his pocket. 'Our elephant gun has been reloaded and my trigger finger is itchy,' he said.

Although shareholders will no doubt have been a-hootin' and a-hollerin' to see Buffett still so full of refried beans, the big question remains unanswered: what's going to happen when Buffett hangs up his pocket calculator? After all, his deputy Charlie Munger is seven years older, and another of his senior team has just retired at a 'mere 74'. 39-year-old Todd Combs, a fairly obscure fund manager who Buffett hired last year, appears to be the heir apparent. But shareholders know that whoever gets the job will have a difficult task filling those shoes, which is why they're getting twitchy. Buffett seems to have parked that discussion for a little while longer, but he can't put it off forever.

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