Optimism from the Oracle of Omaha
A housing recovery will probably begin within a year. So says Warren Buffett, investment icon and CEO of Berkshire Hathaway.
Still, the Omaha, Neb.-based company’s home-construction-related business portfolio has struggled recently. Johns Manville, MiTek Industries, Shaw Floors and Acme Brick combined for pre-tax profits of $362 million in 2010, compared with $1.3 billion in 2006. And during that time, the four brands have shed about 9,400 jobs.
Still, all four are continuing to invest in significant improvements or acquisitions. For instance:
• MiTek made five bolt-on acquisitions in the past 11 months;
• Acme Brick spent $50 million to acquire Montgomery, Ala.-based Jenkins Brick & Tile;
• Johns Manville is building in Milan, Ohio, a $55 million plant to make single-ply roofing membrane; and
• Shaw will spend $200 million in 2011 on domestic plants and equipment.
“These businesses entered the recession strong and will exit it stronger,” Buffet wrote in his annual letter to shareholders.
In his widely read missive, the Oracle of Omaha added a characteristic defense of American capitalism. “Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America,” Buffett wrote. “Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted.”