- Berkshire Hathaway’s first-quarter profit fell more than 53% from $11.7 billion to $5.46 billion.
- But Chief Executive Officer Warren Buffett said the company’s operating profit of $7.04 billion, up slightly from a year ago, was a better measure of performance.
- Berkshire Hathaway’s investments fell by $1.58 billion in the first quarter, compared with an increase of $4.7 billion a year ago.
OMAHA, Neb. – Berkshire Hathaway’s first-quarter earnings fell more than 53% due to a large change in the face value of its investments, but Warren Buffet found ways to put some of the company’s huge amount of cash to work, which gave shareholders something to talk about in saturday annual meeting.
Berkshire said it earned $5.46 billion, or $3,702 per Class A share, during the quarter. That’s down from $11.7 billion, or $7,638 per Class A share, a year ago.
But the key change during the quarter was that Berkshire’s cash mountain shrank to $106bn from $147bn at the start of the year as it invested $51bn in stocks. Buffett also spent $3.2 billion buying back shares of Berkshire.
Buffett told shareholders on Saturday that just after writing to them in his Feb. 26 annual letter that he was having trouble finding something to buy at attractive prices, Berkshire spent more than $40 billion on stocks over the next three weeks, including a day in early March, when he spent $4.6 billion at his peak.
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During the first quarter, Buffett agreed buy the Alleghany insurance conglomerate for $11.6 billion and made multi-million dollar investments in hp inc. and Occidental Petroleum. Buffett said Berkshire bought 14% of Occidental’s shares in the first half of March as its holding increased, adding to its already massive investment in Apple stock during the quarter. However, he has not yet disclosed all of his stock purchases, so it’s not immediately clear what Berkshire invested in this year.
But Berkshire did say in its quarterly report that its stake in oil giant Chevron soared to $26 billion at the end of the quarter, up from $4.5 billion at the beginning of the year, to make it one of the company’s four largest investments. Edward Jones analyst Jim Shanahan said that with the combined investments from Chevron and Occidental, Berkshire now has more than $40 billion invested in the oil sector.
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Buffett said Berkshire was able to take advantage of the fact that Wall Street operates largely like a “gaming parlor” with many people wildly speculating on stocks.
“Occasionally, Berkshire gets a chance to do something, and it’s not because we’re smart. It’s because we’re sane. Buffett said.
Buffett’s investment partner, Charlie Munger, said there’s been an incredible amount of speculation in the stock market over the past two years as the market soared.
“We have people who know nothing about stocks being advised by brokers who know even less,” Munger said.
But Berkshire said the value of its investments fell by $1.58 billion in the first quarter when a year ago the paper estimate of its investments grew by $4.7 billion. That accounted for most of the change in net earnings.
Buffett says Berkshire’s operating profit is a better measure of the company’s performance because it excludes investment gains and losses. By that measure, Berkshire’s earnings were flat at $7.04 billion, or $4,773.84 per Class A share, compared with $7.018 billion, or $4,577.10 per Class A share, a year ago.
That exceeded Wall Street’s expectations. The four analysts surveyed by FactSet had expected Berkshire to report operating earnings of $4,277.66 per Class A share.
Berkshire said on Saturday that earnings improved at most of its businesses, including the rail, utility and manufacturing companies it owns, but technical income fell at its insurance companies.
In addition to investments, Berkshire Hathaway owns more than 90 businesses, including the BNSF Railroad, several major utilities, Geico insurance, and a variety of retail and manufacturing companies. Tens of thousands of shareholders packed an Omaha stadium not far from the company’s headquarters on Saturday to hear Vice Chairman of Buffett and Berkshire spend hours answering any and all questions.
Japanese investor Heihachiro “Hutch” Okamoto is attending the meeting for the first time this year in part because he is hearing a lot of interest in investing in the US stock market from the brokerage firm where he works in Japan.
“Mr. Buffett is kind of a representative of the US stock market, so I wanted to see you here,” Okamoto said.
Janet Dalton of Overland Park, Kansas, said she has been attending the meetings for decades. Her family has an even longer association with the company because her father bought shares in the Berkshire Hathaway textile company even before Buffett took it over in 1965 and began building it into the conglomerate it is today. They never sold the shares, which are now selling for nearly $500,000 each.
Dalton said he misses the more detailed business answers Buffett used to give in previous meetings he attended.
“When I first came to meetings, it was like getting a mini-MBA. Now it has become more general,” Dalton said. But part of what keeps her coming back year after year is the chance to reconnect with friends and fellow investors she’s met at previous meetings.
Reference-www.usatoday.com