Share

Ironic? Buffett’s Berkshire to get R400bn boost from Trump tax plan

New York - Hillary Clinton supporter Warren Buffett’s Berkshire Hathaway could get a $29bn (R399.32bn) boost to its book value under tax-rate cuts advocated by President-elect Donald Trump, according to Barclays.

“We would view this magnitude of increase as favourable for Berkshire shares since it is generally valued on price to book value,” Barclays analysts led by Jay Gelb said in a note to investors on Monday.

Berkshire has jumped about 8% in New York trading since Trump won the November 8 election, helped by the increasing value of Buffett’s holdings in bank stocks as interest rates climbed. The prospect of lower taxes is also helping. Gelb’s analysis covered a net deferred tax liability of about $50.4 billion at the end of 2015, a figure that includes potential costs if Buffett sells investments that gained in value.

The review doesn’t take into account the DTLs at some energy operations, where benefits wold be enjoyed by utility customers and not Berkshire shareholders.

The value of the liability is based on the current 35% tax rate and would fall by about $22bn at a 20% corporate tax rate and drop by $29bn at 15%, Gelb wrote. Trump has called for cutting the business tax rate to 15%, while the House Republican “blueprint” for tax changes proposes 20%.

Buffett has long pursued strategies to limit tax payments made by Berkshire. Still, the billionaire supported Democrat Clinton in the presidential race, and has dismissed the idea that higher rates would discourage investment. He told shareholders in 2013 that when US businesses say corporate taxes are too high, “I would have you take that with a grain of salt.”

The billionaire said at Omaha, Nebraska-based Berkshire’s most recent annual meeting that his company would thrive no matter who won the election.

“Berkshire will continue to do fine,” he said at the April gathering.

Gelb wrote that the change in book value wouldn’t correlate with an increase in cash. Rather it is a metric of financial strength monitored by investors and ratings firms. Berkshire’s book value was more than $270bn as of September 30. Buffett didn’t immediately return a message left with an assistant seeking comment.

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.90
+0.2%
Rand - Pound
23.84
+0.3%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.31
+0.3%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders