Berkshire Hathaway profit up 40pc

Berkshire Hathaway, the investment and insurance company controlled by Warren Buffett, said fourth-quarter profit rose 40 per cent on a US$1.63 billion ($2.22 billion) gain from betting against the US dollar.

Net income climbed to US$3.34 billion, or US$2171 a share, from US$2.39 billion, or US$1553, a year earlier, the Omaha, Nebraska-based company said.

Excluding the currency bet and other investment gains and losses, Berkshire's profit rose 19 per cent to US$1.84 billion, beating a US$1.4 billion estimate by Fox-Pitt Kelton Inc analyst Gary Ransom.

Buffett, 74, began betting against the dollar in 2002 on concern that widening US trade and budget deficits would erode its value.

As the dollar slumped 7.5 per cent against major currencies, Buffett increased Berkshire's position in the fourth quarter to US$21.4 billion of foreign currency forward contracts, or agreements to purchase an asset at a future date.

"The evidence grows that our trade policies will put unremitting pressure on the dollar for many years to come," Buffett said in his annual letter to shareholders.

Berkshire's forward contracts rose from US$20 billion on September 30 and were spread among 12 denominations that Buffett declined to identify.

Buffett said he "struck out" at finding acquisitions last year, and Berkshire's cash holdings rose to US$43.4 billion at year end from US$43 billion on September 30.

He and vice-chairman Charlie Munger will "work to translate some of this hoard into more interesting assets during 2005", Buffett said.

Berkshire's full-year net income fell 10 per cent to US$7.31 billion amid losses from US hurricanes.

Its book value, or assets minus liabilities, rose 10.5 per cent in 2004 after taxes, compared with a 10.9 per cent gain in the Standard & Poor's 500 Index, before taxes.

On that basis, 2004 was one of only six years since 1965 when Berkshire's growth in net worth underperformed the S&P 500.

"The fact that he can compound net worth by 10.5 per cent with US$43 billion of cash on the balance sheet is a hell of an accomplishment," said Keith Trauner, a fund manager at Fairholme Capital Management in New Jersey.

- BLOOMBERG