Warren Buffett 2016 earnings top $12 Billion – What is his secret?


Warren Buffett made $12 billion and reclaimed his position as the second richest person in the world. Here are the details of Warren Buffett 2016 earnings

5 January, AtoZForex – Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc stands second in the list of world’s richest person after Bill Gates with a net worth of 73.4 Billion USD. Sources claimed Warren Buffett earned $12 billion in the year 2016.

Warren Buffett 2016 earnings

The stock market investor and the mastermind earned 12 Billion USD in the year 2016. This happens due to Donald Trump’s rally, the surge in banking stocks and the airline stocks. Buffett’s Berkshire Hathaway Inc surged 11.5% since election day on November 8. Here is the detailed explanation of three primary reasons which let him earn this much amount.

The US Presidential election

Warren Buffett supposed Hillary Clinton to win the 2016 US Presidential elections but Trump holds the position. It was Trump’s victory which helped the stock market to surge since election day on November 8. The Berkshire Hathaway gained 11.5 percent since the election.

05berkshire-hathaway Berkshire Hathaway Inc (BRK.A- NYSE) 1 Year chart

 

The Berkshire Hathaway share price was 220,303.00 USD per share on 7th Nov 2016 – the day before the election result and reached 246,599.98 USD per share on 05 Jan 2017.  Buffett is the largest shareholder of Hathaway group and holds 23% shares in 2016.

Bank Stocks

Warren Buffett is a long-time fan of public sector stocks like banks and other financial services including Well Fargo, American Express, BOA and Goldman Sacks. Looking to the data Buffet invested $5 billion in Bank of America in 2011. He purchased 700 million shares of Bank of America at an exercise price of $7.14 per share. At that time BOA traded at about 50 percent discount. Today, the Bank of America is trading at 22.95 USD per share.

05boa Bank of America corporation (BAC-NYSE) 5 years chart

 

Furthermore, if the Federal Reserve continues to raise interest rates in 2017, banks will earn more net interest income, which increases earnings.

The Airline Stocks

Buffett also disclosed that Berkshire invested in three airlines companies in 2016: American Airlines, Delta Airlines and United Continental Holdings. An investment in the airline sector is a rarity for Warren Buffett, who has historically shunned airline stocks due to significant capital requirements and Earning per share. Since 2000, lots of airlines have filed for bankruptcy protection, including American, Delta airlines and United airlines. Buffett initially lost about $358 million in USAir in 1989 (the value dropped to $89.5 million by 1995), although his investment later recovered. Moreover, Berkshire has invested in the aviation sector, including holdings in NetJets, Precision Castparts and FlightSafety.

Warren Buffett 2016 earnings Dow Jones US Airlines Index 1 year chart

 

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