Buffett's company reported a loss of $44 billion, but its business is thriving

Josh Funk, AP Business Writer

OMAHA, Nebraska (AP) — Warren Buffett’s firm reported a loss of $43.76 billion in the second quarter, but Berkshire Hathaway’s many operating companies generally performed well and the economy , suggesting that it is weathering the pressure from the rise. interest.

Berkshire said Saturday that an unrealized decline in the value of its investments of $53 billion had forced it to report a loss of nearly $44 billion, or $29,754 per Class A share. That’s down from his $28.1 billion ($18,488 per Class A share) a year ago.

Shares of Berkshire’s biggest investments Apple, American Express and Bank of America all fell sharply in the second quarter. But all of these stocks recovered during the third quarter. That means Berkshire’s portfolio is worth more than it was at the end of the quarter.

Buffett has previously said he believes Berkshire’s operating profit is a better measure of the company’s performance because it excludes investment gains and losses, which can fluctuate significantly from quarter to quarter. rice field. According to this measure, Berkshire’s revenue jumped from last year’s $6.69 billion ($4,399.92 per class A share) to he $9.28 billion ($6,312.49 per class A share).

Four analysts surveyed by FactSet had expected Berkshire to report an operating profit of $4,741.64 per Class A share.

In addition to investments, Berkshire wholly owns more than 90 companies. Berkshire said operating profit increased across all major divisions, including insurance companies, major utilities and BNSF railroads. Strong performance for most companies offset Geico’s $487 million pre-tax loss, he said, reporting higher losses on auto claims due to soaring vehicle values ​​and continued shortages of auto parts. Did.

CFRA Research analyst Cathy Seifert said Geico’s results show auto insurers are struggling to raise rates to offset higher costs than their peers at Progressive and Allstate. “I’m sure it’s worth noting,” he said.

With an eclectic collection of manufacturing, retail, insurance, utilities and service businesses involved in so many different industries, Berkshire’s profits tend to follow what the economy is doing, making it more It is often seen as a microcosm of the broader economy. Edward Jones analyst Jim Shanahan said Berkshire’s strong performance suggests many companies were able to raise prices enough to offset the sharp rise in inflation, leading to a rise in interest rates. Even though the rise has hit Berkshire’s network of car dealers and its manufacturing housing division, it’s affecting other parts of the company, he said. Benefit from higher investment interest rates.

“This is a business that affects different parts of the economy. Showing such broad earnings and profit strength across franchises gives us confidence that the broader economy is doing pretty well. I will,” said Shanahan.

Berkshire said its fourth-quarter sales rose more than 10% to $76.2 billion as a result of price increases across many of its businesses.

Berkshire said it had $105.4 billion in cash at the end of the first quarter, little changed from the $106 billion it reported at the end of the first quarter. Buffett reportedly invested billions in Occidental Petroleum, but indicated he didn’t buy that many shares in the second quarter. In his first three months of the year, Berkshire has spent more than $51 billion on stocks.

Berkshire spent $1 billion to buy back its shares this quarter, but the pace has slowed significantly. Berkshire bought back $3.2 billion of his stock in the first quarter and $27 billion of hers last year. For Buffett, who struggled to find big acquisitions before his stocks of oil companies Occidental and Chevron and his printer maker HP surged this year, buybacks have been his biggest investment in recent years. was.

Berkshire’s acquisition drought ended this year when it signed a $11.6 billion deal to acquire insurance conglomerate Allegany.

An interesting piece of information revealed deep within Berkshire’s Securities and Exchange Commission filings is that the company bought Berkshire Vice Chairman Greg Abel’s stake in Berkshire’s Utilities division in June for $870 million. That’s it. Abel says he plans to take over as CEO of Berkshire after Buffett is gone, but his legendary 91-year-old investor has no plans to retire. The filing gave no indication of what Abel would do with the money, including whether it would be reinvested in Berkshire stock.

Some investors are calling for more investment in Berkshire before Abel takes over as CEO. In the last report, Abel held his five Class A shares and about 2,400 Class B shares. By contrast, Buffett, who owns 229,016 A shares and his 276 B shares, controls more than 30% of Berkshire’s voting stock.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.