Berkshire : Warren Buffett’s company recorded another loss, this time only USD 2.7 billion, due to a reduction in the paper value of its investment portfolio in the third quarter, but with the notable exception of Geico, most of its running businesses fared well.
Berkshire Hathaway announced a quarterly loss of USD 2.7 billion, or USD 1,832 per Class A share, on Saturday. This compares to a profit of USD 10.3 billion, or USD 6,882 per Class A share, a year earlier when the stock market was rising. Berkshire Hathaway posted a USD44 billion loss for the second quarter of this year.
Buffett has long maintained that Berkshire’s operating earnings are a more accurate gauge of the company’s performance since they exclude investment gains and losses, which can change significantly from quarter to quarter.
Berkshire’s operating earnings increased by 20% to USD 7.76 billion, or USD 5,293.83 per Class A share, according to that metric. This is an increase from USD6.47 billion, or USD 4,330.60 per Class A share, previously.
FactSet polled four analysts, who forecasted operating earnings per Class A share of USD 4,205.82 on average. Berkshire Hathaway’s revenue increased by 9% to USD 76.9 billion.
The majority of Berkshire’s more than 90 firms did well during the quarter, but Geico’s core insurance subsidiary recorded a pre-tax underwriting loss of USD 759 million as the cost of auto claims skyrocketed along with the costs of used cars and automotive parts.
Since the second half of last year, Geico has been hindered by rising prices. Geico did raise its rates by 5.4% during the quarter, but this was nearly totally offset by a 4.6% drop in customer base.
Another noticeable weakness in the data was BNSF railroad’s profit, which fell 6% to USD 1.44 billion as it hauled 5% less freight, fuel expenses rose, and wage costs were adjusted up to reflect the raises railroads agreed to pay their workers in tentative deals with their 12 unions.
During the quarter, the majority of BNSF’s counterparts reported large gains in profitability. Berkshire Hathaway reported after-tax damages of USD 2.7 billion from Hurricane Ian. This is compared to USD 1.7 billion in catastrophic damages from Hurricane Ida and massive floods in Europe a year ago.
Despite actively investing in the stock market this year, Berkshire has approximately USD 109 billion in cash, including more than USD 51 billion in the first quarter.
That is up from USD 105.4 billion at the end of the second quarter because Berkshire’s companies generated more cash than they spent. Despite the fact that the acquisition of Alleghany Insurance was completed in October, Berkshire spent USD 11.6 billion after the conclusion of the third quarter.
Buffett’s largest stock purchases this year included approximately USD 12 billion in Occidental Petroleum stock and approximately USD 20 billion in Chevron stock. Berkshire also purchased approximately 70 million shares of video game producer Activision Blizzard in addition to those oil industry purchases.
Berkshire Hathaway also has significant holdings in Apple, American Express, Bank of America, and Coca-Cola stock.
Manufacturing firms like Precision Castparts and specialty chemical company Lubrizol, retail firms like See’s Candy, Dairy Queen, and Helzberg Diamonds, and other companies like NetJets are among the companies owned by the Omaha-based conglomerate.
From 2016 until early 2020, the business purchased substantial stakes in major US airlines United Airlines, Delta Air Lines, Southwest Airlines, and American Airlines, but these were sold in the aftermath of the COVID-19 epidemic.
Berkshire Hathaway has provided a yearly increase in book value to its shareholders of 19.0% on average since 1965 (compared to 9.7% for the S&P 500 with dividends included for the same period) while using enormous amounts of the capital and a little debt.
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