OMAHA, Neb. (AP) – Warren Buffett’s company reported a loss of $43.76 billion in the second quarter, as the value of paper…
OMAHA, Neb. (AP) – Warren Buffett’s company reported a second-quarter loss of $43.76 billion as the paper value of its investments fell sharply, but many of Berkshire Hathaway’s operating companies generally performed well, suggesting the overall economy is holding up. pressure from inflation and is increasing. Interest rates.
Berkshire said Saturday that a largely unrealized $53 billion decline in the value of its investments forced it to report a loss of nearly $44 billion, or $29,754 per Class A share. That’s down from $28.1 billion , or $18,488 per Class A share, a year ago.
The share prices of three of Berkshire’s biggest holdings — Apple, American Express and Bank of America — all fell sharply during the second quarter. But those stocks have all recovered during the third quarter, meaning Berkshire’s portfolio is now worth more than it was at the end of the quarter.
Buffett has long said he believes Berkshire’s operating earnings are a better measure of the company’s performance because they exclude gains and losses from investments, which can vary widely from quarter to quarter. By that measure, Berkshire’s earnings rose sharply to $9.28 billion, or $6,312.49 per Class A share from $6.69 billion last year, or $4,399.92 per Class A share.
Four analysts polled by FactSet expected Berkshire to report operating earnings per Class A share of $4,741.64.
In addition to investments, Berkshire wholly owns more than 90 companies. Berkshire said operating profits were up at all of its major units, including its insurance companies, major utilities and BNSF railroad. Strong results at most of its companies offset a $487 million pretax loss at Geico, which reported bigger losses on auto claims due to rising vehicle values and continued shortages of auto parts.
CFRA Research analyst Cathy Seifert said Geico’s results suggest the auto insurer is having more trouble raising rates to offset those higher costs than its peers at Progressive and Allstate, so “I definitely think it deserves sight”.
Berkshire is often seen as a microcosm of the broader economy because its eclectic collection of manufacturing, retail, insurance, service and utility businesses touch many different industries, and Berkshire’s earnings tend to follow whatever the economy is doing. Edward Jones analyst Jim Shanahan said Berkshire’s strong operating results suggest many businesses have been able to raise prices enough to offset rising inflation, and although higher interest rates are hurting the dealer network Berkshire’s cars and its home manufactured sector, other parts of the company. are benefiting from higher investment rates.
“This is a business that has its tentacles in all different parts of the economy. To show such broad strength of revenue and earnings throughout the franchise gives me a lot of confidence that the broader economy is performing quite well,” Shanahan said.
Berkshire said its revenue rose more than 10% to $76.2 billion in the quarter as many of its businesses raised prices.
Berkshire said it had $105.4 billion in cash at the end of the quarter, which was little changed from the $106 billion it reported at the end of the first quarter. That signaled that Buffett wasn’t buying nearly as much stock during the second quarter, although he has reportedly invested several billion in Occidental Petroleum. In the first three months of the year, Berkshire spent more than $51 billion on stocks.
Berkshire spent $1 billion buying back its own stock during the quarter, but the pace of those buybacks has slowed significantly. Berkshire repurchased $3.2 billion of its stock in the first quarter and $27 billion last year. Before this year’s buying spree in stocks such as oil producers Occidental and Chevron, and printer maker HP Inc., buybacks had been Buffett’s biggest investment in recent years as he struggled to find big buys.
Berkshire’s acquisition drought ended this year when it signed an $11.6 billion deal to buy insurance conglomerate Alleghany.
An interesting tidbit revealed deep in Berkshire’s SEC filing is that the company bought Berkshire Vice Chairman Greg Abel’s stake in Berkshire’s utilities unit for $870 million in June. Abel will take over as CEO of Berkshire once Buffett is unavailable, although the 91-year-old legendary investor has no plans to retire. The filing offered no indication of what Abel would do with the money, including whether he would reinvest it in Berkshire stock.
Some investors have called for Abel to increase his investment in Berkshire before taking over as CEO, so he would have a bigger stake in the company’s future. At last report, Abel held five Class A shares and nearly 2,400 Class B shares. Compare that to Buffett, who owns 229,016 Class A shares and 276 Class B shares to give him control of more than 30% of the stock. by vote of Berkshire.
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