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Berkshire Hathaway Operating Earnings Rise 42%

Berkshire's annual meeting will certainly celebrate the strong growth of many of the firm's operating units and its stock market portfolio.

Berkshire Hathaway is "well positioned to benefit from improving earnings in its non-insurance business as the economy recovers, as well as from robust property-casualty insurance results," Jay Gelb, a Barclays analyst, wrote in a 129-page note Thursday that gives an "overweight" rating to Berkshire's Class A and B shares and respective price targets of $178,500 and $119 a share.

Gelb noted that Berkshire had roughly doubled the S&P 500's gains in 2013, with the outperformance reflecting "substantial exposure to an improving economy and housing market, in addition to a strong positioning to rising equity markets."

Currently, Berkshire holds about $90 billion in equity market investments, according to data compiled by Bloomberg, with Coca-Cola (KO), Wells Fargo (WFC) and International Business Machines (IBM - Get Report) standing out as the firm's three largest stock holdings.

"We expect Berkshire shares to benefit from strong growth in both book value per share and earnings, driven by its insurance and non-insurance businesses," wrote Gelb.

The contribution to operating earnings from Berkshire's non-insurance businesses increased from 43% in 2006 to 70% in 2012, according to the analyst.

Buffett, at 82 years old, continues to show little sign of slowing, as evidenced by a joint deal with 3G Capital to buy Heinz, the iconic ketchup maker.

If there is an elephant in the room in Omaha's CenturyLink Center, where the shareholder meeting will occur, it is roughly $12 billion in free cash flow and $35 billion in pro-forma cash Buffett and Berkshire will wield for future acquisitions.

Buffett has called Berkshire's cash an elephant gun to bag large acquisitions and said in his 2012 shareholder letter he remains on the prowl for big deals.

At last year's shareholder meeting, Buffett said the firm had nearly signed onto a $20-billion acquisition, but dropped out over a disagreement on price. Smead, the investor in Berkshire B shares, said Buffett could target Aflac, if the insurer's founding family ever offered an acceptable price.

Buffett could also buy Mars if a deal were ever pitched to Berkshire, according to Russo of Gardner, Russo & Gardner.

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price," Buffett said in his 1989 shareholder letter.

-- Written by Antoine Gara in Omaha, Nebraska

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