NEW YORK ( TheStreet) -- Berkshire Hathaway ( BRK.A) on Saturday reported better-than-forecast operating earnings as the Warren Buffett-run conglomerate continues to see its earnings rise amid a slow but steady recovery of the U.S economy.
Berkshire Hathaway reported operating earnings of $3.7 billion for the fourth quarter of 2013, a 34% increase from year-ago levels. When counting investment and derivative gains of $1.2 billion for the fourth quarter, Berkshire Hathaway reported net income of just under $5 billion for the fourth quarter, a new record.
Analysts forecast that Berkshire would earn $46.3 billion in revenue and operating income of $3.5 billion, according to Bloomberg data.
Book value per Class A share rose to $134,973 for the full year, an 18% increase from the company's book value per share of $114,214 at the end of 2012. Berkshire's gain in net worth during 2013 was $34.2 billion, the company said.
Those gains allowed Berkshire Hathaway to outperform the S&P 500 index over the six years between 2007 and 2013, however, Berkshire underperformed the S&P on book value growth per share in 2013.
Buffett's annual letter to shareholders normally contains the Oracle of Omaha's thoughts about investing. This year, Buffett devoted a large portion of his shareholder letter to explaining why nonprofessional investors should simply seek low-cost index funds.
Here's Buffett's discussion:
When Charlie [Munger, Berkshire Hathaway vice chairman] and I buy stocks -- which we think of as small portions of businesses -- our analysis is very similar to that which we use in buying entire businesses. We first have to decide whether we can sensibly estimate an earnings range for five years out, or more. If the answer is yes, we will buy the stock (or business) if it sells at a reasonable price in relation to the bottom boundary of our estimate. If, however, we lack the ability to estimate future earnings -- which is usually the case -- we simply move on to other prospects. In the 54 years we have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.