Warren Buffett’s Berkshire controls stock purchases and records a loss of $ 43.8 billion

Warren Buffett’s Berkshire Hathaway slowed new investment dramatically in the second quarter after setting a dizzying pace earlier in the year as the US stock market sell-off pushed the rail-insurance conglomerate to a $ 43 loss. 8 billion.

Berkshire said on Saturday that the decline in global financial markets weighed heavily on its equity portfolio, which fell to $ 328 billion from $ 391 billion at the end of March. The reported loss of $ 53 billion in the three months to June far exceeded an optimistic quarter for its businesses, which improved their profitability.

The company’s filing with US securities regulators showed that its purchases of new shares fell to about $ 6.2 billion in the quarter, down from $ 51.1 billion spent between January and March, a snap. which surprised Berkshire shareholders. Berkshire has sold $ 2.3 billion worth of shares in the past three months.

Berkshire also spent $ 1 billion to buy back its stock in June, a tactic commonly used when Buffett and his investment team find fewer attractive targets in the market.

The 91-year-old investor warned at the company’s annual meeting in Omaha, Nebraska in April that the madness of multi-billion dollar stock purchases would likely slow as the year progressed, saying the atmosphere at the company’s headquarters had gotten more. ” lethargic”.

Bar chart of cash, cash equivalents and short term held treasury bills (billions of dollars) showing the Berkshire Hathaway war chest

Investors will receive a more detailed update on how Berkshire’s equity portfolio has changed later this month as the company and other large-scale managers disclose their investments to regulators. Separate archives show that the company has increased its stake in the energy company Occidental Petroleum in recent months.

Berkshire’s huge liquidity and Treasury holdings have changed little since the end of March, dropping from less than $ 1 billion to $ 105.4 billion.

While net income fell from a profit of $ 5.5 billion at the beginning of the year to a loss of $ 43.8 billion, operating income – which excludes the ups and downs of Berkshire’s equity positions – rose. 39% to $ 9.3 billion. This included a $ 1.1 billion currency-related gain on its non-US dollar debt.

Berkshire is required to include fluctuations in the value of its equity and derivatives portfolio as part of its earnings each quarter, an accounting rule Buffett warned can make the company’s earnings data seem “extremely misleading” and volatile.

The loss was $ 29,754 per class A share. It contrasts with the profit of $ 18,488 per share that the company reported a year earlier.

YTD performance line chart (%) showing Berkshire outperformed the overall US stock market this year

Berkshire’s results are being analyzed by analysts and investors looking for signs of health in the US economy at large, as its operations run through much of the country’s industrial and financial heartland.

Inflationary pressures continued to be felt, although many of its divisions were able to pass higher prices on to customers. The BNSF Railway, which Buffett described as one of the “four giants” within Berkshire, reported a 15% increase in revenue as fuel surcharges charged to customers offset a drop in shipping volumes. Fuel costs for BNSF, which has more than 32,500 miles of railroad tracks in 28 states, have increased by more than 80 percent year over year.

The Geico insurance unit reported a pre-tax underwriting loss of $ 487 million in the quarter, up from three months earlier. The division attributed the greater loss to much higher prices for new cars and auto parts it has to pay when its customers are involved in accidents.

Buffett in April said the company was seeing the effects of inflation firsthand, warning it “scams almost everyone.”

Berkshire real estate businesses, including modular housing unit Clayton Homes and home furnishings retailer Nebraska Furniture Mart, offered tips on how consumers were responding to higher prices and higher mortgage rates. Furniture sales have been relatively flat, with higher prices offsetting lower orders.

However, there were signs of strength in the housing market, with Clayton’s new housing sales up 9.8% in the first half of the year. Division revenue increased 28% to $ 3.4 billion in the second quarter from a year earlier.

“Interest rate hikes on home loans will most likely slow the demand for new home construction, which could negatively impact our businesses,” Berkshire warned. “We also continue to be negatively impacted by persistent supply chain disruptions and significant cost increases for many raw materials and other inputs, including energy, freight and labor.”

Berkshire addressed a potential conflict raised at the company’s annual meeting earlier this year. In June, he spent $ 870 million to buy shares that Berkshire Vice President Greg Abel, Buffett’s anointed successor, held directly in his energy unit.

Abel joined the company in 2000, when Berkshire acquired the MidAmerican Energy utility and had held some of its wealth in that business rather than shares in the Berkshire parent company.

Berkshire Hathaway’s Class A common stock was down around 2% this year, outperforming the benchmark S&P 500’s 13% decline.

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