Warren Buffett’s Berkshire Hathaway Inc took to the stock markets in the first quarter, spending more than $51 billion on stock, including a much larger stake in Chevron Corp.
Berkshire, which Buffett has run since 1965, also said on Saturday that quarterly operating profit was little changed from a year earlier, with some companies able to avoid supply chain disruptions. Geico, the auto insurer, posted an underwriting loss.
The Omaha, Nebraska-based company also said it bought back $3.2 billion of its own shares in the quarter, but none in the first three weeks of April.
The Berkshire revelations suggest that Buffett has finally found some great new uses for disposing of Berkshire’s cash pile, which has shrunk by more than $40 billion to around $106 billion.
Chevron’s stake grew to $25.9 billion as of March 31 from just $4.5 billion three months earlier, as oil prices surged following the Russian invasion of Ukraine.
That came on the heels of Berkshire’s purchase of more than $6 billion of shares in Occidental Petroleum Corp, where it already held a $10 billion preferred stock stake.
Buffett also committed $11.6 billion to buy insurance company Alleghany Corp and bought $4.2 billion worth of HP Inc.
Berkshire ended March with $391 billion in shares, more than half of the company’s total market value of $712 billion.
Other businesses include the BNSF Railroad, Berkshire Hathaway Energy, and a variety of manufacturing and retail operations including See’s Candies and Dairy Queen ice cream.
First-quarter operating profit rose to $7.04 billion, or about $4,786 per Class A share, from $7.02 billion a year earlier.
Berkshire’s net income fell 53% to $5.46 billion, or $3,702 per Class A share, from $11.71 billion, or $7,638 per Class A share, a year earlier.
The net results included $1.58 billion gains and losses from stocks that include Apple Inc as well as Chevron.
An accounting rule requires Berkshire to report unrealized gains and losses with net income, and Buffett urges investors to ignore the resulting volatility.
Berkshire released the results ahead of its first in-person annual shareholder meeting since 2019 in Omaha.
In its quarterly report, Berkshire alluded to the invasion of Ukraine, without mentioning it specifically, and the spread of Omicron variants of COVID-19 when discussing the supply chain issues now facing many companies.
“Significant supply chain disruptions and higher costs have persisted into 2022,” he said. “In addition, the development of geopolitical conflicts in 2022 has contributed to the disruption of supply chains, resulting in increased costs of basic products, goods and services in many parts of the world.”
Berkshire businesses that were affected included Precision Castparts aircraft parts, Clayton Homes mobile homes and McLane food distribution.
Chip shortages were also an issue, lowering consumer shipment volume at BNSF and lowering sales volume at Berkshire Hathaway Automotive car dealerships.
However, revenue increased at both, with BNSF benefiting from higher fuel prices and surcharges, and revenue from car and truck sales growing as vehicles become more expensive.
Rising used car prices and a shortage of parts also weighed on auto insurer Geico, which posted an underwriting loss due to rising loss claims.
Earnings at Berkshire Hathaway Energy, one of Berkshire’s largest companies and a consistent earner, rose 7%, helped by higher electric utility margins and tax benefits at its MidAmerican Energy unit.
Berkshire shares have weathered recent market volatility much better than many other big US stocks. Its Class A shares are up more than 7% this year, while the Standard & Poor’s 500 is down 13%.
Reference-www.theglobeandmail.com