Warren Buffett’s 50th annual investor letter: What will the Sage of Omaha have to say?

It is thought the US investor will look beyond America's shores

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The Independent Online

Tomorrow marks a rather special anniversary for billionaire Warren Buffett – the 50th year he has sent out his annual investor letter to Berkshire Hathaway Inc shareholders.

The address is a much-anticipated one, coming as it does from a man dubbed the Sage of Omaha for his innate investment intelligence, and usually details Buffett’s candid thoughts on investing, business and life.

Worth $58.2 billion, self-made Buffett is the fourth richest person in the world and in his letter last year he described America as "the mother lode of opportunity" (well, he should know).

But according to the analysts Buffett could be penning something rather different this time around, as he sets his sights on global horizons. The 84-year-old recently decided to buy a German motorcycle accessories retailer and said he may shop more in that country.

That would mark a significant turn for Berkshire, a conglomerate with more than 80 businesses, giant stock investments and a $360 billion market value.

It is thought Buffett may also detail his vision for Berkshire in the decades to come, including after his death.

His second-in-command 91-year-old Charlie Munger, is also expected to express his thoughts.

 

"Warren Buffett recognizes that global investing is going to be an important part of the future," Michael Yoshikami, chief executive of Destination Wealth Management in Walnut Creek, California and a longtime Berkshire shareholder, told Reuters.

Buffett's strategy of buying solid companies at low prices has become more difficult in the US. In the first quarter of 2009, when the S&P 500 index was barely one-third of what it is now, stocks on average cost 12.9 times projected full-year earnings.

At the end of 2014, that multiple had reached 17.4, above the long-term average of 14.8 times earnings, meaning it costs more to get the same financial pop.

By contrast, the rest of the world's growth has been sluggish. Germany is expected to grow just 1.3 per cent this year, while the US. economy may expand 3.6 per cent, according to the International Monetary Fund (IMF).

Though Buffett said this week the falling euro was not his primary driver for buying in Europe, it was a factor. The currency has slid about 20 per cent against the US dollar since May.

In the last year, Berkshire has announced several purchases worth or estimated at a couple of billion dollars each.

These have included Procter & Gamble Co's Duracell battery unit, the Van Tuyl auto retailer, and SNC-Lavalin Group Inc's AltaLink energy transmission unit in Canada.

Buffett also kicked in $3 billion toward Burger King's purchase of Canadian doughnut chain Tim Hortons, which created Restaurant Brands International Inc.

Burger King is run by Brazil's 3G Capital, which shares ownership with Berkshire of ketchup maker HJ Heinz Co.

Berkshire ended September with $62 billion in cash, well above the $20 billion cash cushion Buffett likes. That leaves more than $40 billion to go shopping.

That means Buffett needs big purchases, which he calls "elephants", to soak up significant amounts of money. He has said he would team up again with a partner such as 3G Capital.

"There may be opportunities overseas that he would certainly consider," said Cathy Seifert, an analyst with S&P Capital IQ.

But even if Berkshire spreads its wings geographically, Seifert said, it will not turn its back on a good US purchase.

"I definitely would not rule out the US," she said.

Additional reporting by Reuters

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