Trump tax plan could boost Berkshire book value could by $29 bn
06 Dec 2016
Warren Buffett's Berkshire Hathaway Inc could see its book value boosted by $29 billion under tax-rate cuts advocated by president-elect Donald Trump, according to Barclays Plc.
''We would view this magnitude of increase as favourable for Berkshire shares since it is generally valued on price to book value,'' Barclays analysts led by Jay Gelb said in a note to investors yesterday.
Berkshire had shot 8 per cent in New York trading since Trump's election victory on 8 November, helped by the increasing value of Buffett's holdings in bank stocks, with the increasing interest rates.
The prospect of lower taxes too. Gelb's analysis covered a net deferred tax liability (DTL) of about $50.4 billion at the end of 2015, a figure that included potential costs if Buffett sold investments gained in value.
The review did not factor in the DTLs at some energy operations, where benefits would be enjoyed by utility customers and not Berkshire shareholders.
The value of the liability as based on 35 per cent tax rate and would fall by about $22 billion at a 20 per cent corporate tax rate and fall by $29 billion at 15 per cent, Gelb wrote. Trump had called for slashing the business tax rate to 15 per cent, even as the House Republican ''blueprint'' for tax changes proposed 20 per cent.
According to commentators, the gain had been fuelled by optimism that Trump's policies could be friendly toward business, and the rising value of holdings in bank stocks such as Wells Fargo & Co.
Buffett had endorsed Trump's Democratic rival Hillary Clinton for president.