OMAHA, NEB. (
shares have risen a mere 4.8% year-to-date, but it's enough to keep Warren Buffett's
Berkshire Hathaway on Monday released copies of a letter sent to the
Securities and Exchange Commission
in May, in which the insurance firm justified its accounting treatment for U.S. Bancorp and other stock investments, including
, according to
The SEC inquired earlier this year why Berkshire Hathaway did not write down losses taken on shares in the two companies. According to the article, the SEC sent a letter to the company in April asking why it was not using write downs on shares that it held for over a year which had the potential for $1.86 billion in unrealized losses.
Compared to what Berkshire Hathaway paid for the two stocks when it originally took equity positions, U.S. Bancorp's stock was down 27% as of the end of 2009 and 18% on its Kraft investment, according to a
In a response, Berkshire predicted that shares of the two companies would eventually move higher than the original cost of each stock, based on their earnings potential.
"We believe it is reasonably possible that the market prices of Kraft Foods and U.S. Bancorp will recover to our cost within the next one to two years assuming that there are no material adverse events affecting these companies or the industries in which they operate," Berkshire CFO Marc Hamburg said in the letter, according to
The KBW Bank Index is down 4.2% year-to-date.
As of June 30, Berkshire Hathaway was one of the largest institutional owners of U.S Bancorp shares, holding approximately 69 million shares, or 3.6% of the bank's stock, according to
. That stake was worth $1.63 billion as of Friday's close, up roughly 5% from June 30.
U.S. Bancorp is the fifth largest bank in the country behind
Bank of America
. Last week,
reported another solid quarter of profit, topping Wall Street estimates. It is one of the few banks these days that is
profitably lending - a key indicator to bank investors
The stock got yet another vote of confidence on Friday when it received a
U.S. Bancorp shares were falling marginally on Monday.
--Written by Laurie Kulikowski in New York.
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