Book Value
Berkshire's book value, a measure of assets minus liabilities, rose 1.7 percent to $160 billion in the nine months ended Sept. 30, helped by the Burlington Northern Santa Fe railroad and units like toolmaker Iscar Metalworking Cos. The price-to-book ratio was about 1.2 on Dec. 31, higher than the third-quarter average of 1.1, according to data compiled by Bloomberg. Book value was $5.3 billion at the end of 1990.
Berkshire is the biggest shareholder of Wells Fargo & Co. and New York-based American Express Co., both of which posted fourth-quarter gains. Wells Fargo, the San Francisco-based bank that is the biggest U.S. mortgage lender, fell 22 percent in the first nine months of the year, wiping more than $2 billion off of the market value of Berkshire's stake.
Buffett, who built Berkshire through stock picks and insurance sales, has transformed the company by buying whole companies and adding businesses with large infrastructure like the railroad and a power producer. The shift, Buffett said in 2007, has made Berkshire's book value less sensitive to declines in equity markets.
Expect To Outperform
"We, therefore, expect to outperform the S&P in lackluster years for the stock market and underperform when the market has a strong year," Buffett said in Berkshire's 2006 annual report, adding an entry to his list of business principles included in every year-end edition.
The earthquake and tsunami that struck Japan on March 11 contributed to $1.3 billion of after-tax catastrophe costs in the first nine months of the year, compared with about $500 million a year earlier. Losses on derivatives, used to bet on long-term stock gains and the creditworthiness of borrowers, widened 23 percent to $2.36 billion.
Buffett, who runs Berkshire with a staff of about 20 people at the company's headquarters, has told investors the firm has a list of candidates capable of succeeding him at CEO. Sokol, a former chairman of Berkshire's MidAmerican Energy Holdings, was seen by some, including Buffett biographer Andrew Kilpatrick, as a possible successor before he resigned.