Buffett's Berkshire could get $29 billion Trump tax boost: analyst

Mon Dec 5, 2016 5:41pm EST
 
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(Reuters) - Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote) could get a $29 billion boost to its book value if President-elect Donald Trump is able to slash the U.S. corporate tax rate to 15 percent from 35 percent, Barclays Capital wrote on Monday.

Trump's proposed reduction could help Berkshire lower its net deferred tax liability to $21.6 billion from $50.5 billion, excluding sums associated with its regulated utility units, Barclays analyst Jay Gelb said.

Shareholders could reap the benefit, particularly because Buffett considers book value, a measure of assets minus liabilities, a key measure of Berkshire's growth. Gelb said a $29 billion increase would equal about 11 percent.

"We would view this magnitude of increase as favorable for Berkshire shares since it is generally valued based on price-to-book value," Gelb wrote.

Berkshire's Class A stock price has risen 8.4 percent since the Nov. 8 election, touching an intraday record $240,500 on Monday.

The gain has been fueled 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 (WFC.N: Quote).

Buffett endorsed Trump's Democratic rival Hillary Clinton for president, though in his more than half-century running Berkshire has long tried to limit the Omaha, Nebraska-based conglomerate's tax bill.

He said in April that the odds were "extremely high" that Berkshire would buy back "a lot" of stock if the price fell below 1.2 times book value. Buffett also said the company was worth much more.

(Reporting by Jonathan Stempel in New York; Editing by Jonathan Oatis)

 
U.S. Democratic presidential candidate Hillary Clinton waves to supporters as she is introduced by Warren Buffett during a campaign rally at the Omaha North High Magnet School in Omaha, Nebraska August 1, 2016. REUTERS/Dave Kaup