The profits of the holding company Berkshire Hathaway decreased in the second quarter, when the market upheavals did not pass over the company’s huge investment portfolio. The company from Omaha, Nebraska, has diverse businesses, from the insurance company Geico (Geico) and the railroad manufacturer BNSF, to the sports clothing manufacturer Brooks (Brooks). The quarterly loss was $43.8 billion, reflecting a loss of $29,754 for the company’s class A stock. For comparison, in the same period last year, Berkshire posted a profit of $28.1 billion, that is, about $18,488 per share (Berkshire Hathaway tends to lose when the capital market is down, because its and her insurance company has many financial holdings).
Operating profits, which did not include part of Berkshire’s investment results, rose to $9.3 billion, and the growth was evident in all the company’s major business units, including the railroads department, the utilities and energy companies, as well as the insurance business.
Berkshire Hathaway CEO Warren Buffett said he prefers to look at operating profit to gauge the company’s performance because accounting rules require that unrealized gains and losses from the investment portfolio be included when the company reports net income. When markets fall, as they have this year, it could have a materially negative impact on Berkshire’s earnings, even if its underlying business does well.
“We believe that gains and losses from investments and derivatives are generally insignificant for understanding our quarterly or annual report, or for evaluating the economic performance of our business,” Berkshire said when the reports were released.
Despite the inflation, some of the girls managed to grow in the quarter
The S&P 500 is down 13% so far this year, after the highest inflation in years forced the Federal Reserve to quickly raise interest rates. The increase in the price of everything from transporting goods to wages and raw materials is weighing on companies, including those included in Berkshire’s portfolio.
The railroad company, for example, experienced a 20% increase in operating costs in the second quarter, largely driven by a steep increase in fuel prices and the cost of salaries.
“In terms of inflation in our companies, the levels we’ve seen have been extraordinary,” Buffett said at the company’s annual shareholder meeting earlier this year.
Despite the pressure of rising prices and the cooling of economic activity, many of Berkshire’s companies managed to grow in the second quarter, thanks to passing on higher costs to consumers. BNSF implemented a surcharge on fuel and managed to bring in more money for each car traveling on their tracks, while Forest River, which manufactures cars, boats and buses, managed to sell tools at higher prices.
Other companies were hurt by inflation. Geico had to spend more on claims in the automobile sector due to the increase in car prices and a lack of spare parts.
Extensive investments in energy at the expense of self-purchase
But in the meantime, Berkshire continued to increase its investments in the stock market in the second quarter. The bulk of the money went into the energy sector, when Berkshire began buying shares of Occidental Petroluem in February, and quickly became the largest shareholder in the company, with 17% At the end of the second quarter, which increased due to additional purchases since l-19% ofOccidental.
Energy stocks have been the best performers in the stock market so far this year, due to the rise in oil prices after the Russian invasion of Ukraine. Analysts predict that Berkshire will soon reach a 20% stake in Occidental, which will allow it to begin including part of the oil company’s profits in the group’s quarterly reports.
Because Berkshire invested a lot of money in stocks, it slowed down the pace of its own buyback. The company spent about $1 billion on own acquisitions in the second quarter, compared to $3.2 billion in the corresponding quarter last year.
These expenses barely left a mark on the company’s cash pile. The quarterly report states that Berkshire has approximately $105.4 billion in cash and equivalent assets at the end of the quarter, compared to $106.3 billion at the end of the previous quarter.
Background: textile notebook for world-wide holdings / Shiri Habib-Waldhorn
Berkshire Hathaway is a holding company with investments in diverse fields such as insurance, infrastructure, energy and more. The company has full ownership or control over a large number of companies, which are considered its subsidiaries – for example, as it previously acquired the Israeli Industrial Company will lie From the Wertheimer family. At the same time, Berkshire also makes financial investments, in the framework of which it purchases individual percentages in traded companies (for example, it held about 4% of the shares of the pharmaceutical company Teva for several years, but finally sold them at a loss).
The company’s controlling owner, 91-year-old Warren Buffett, grew up in Omaha, Nebraska. His father was a businessman and a member of Congress from the Republican Party. According to Forbes magazine, Buffett’s current fortune is close to 102 billion dollars (fifth among the world’s richest). Already as a teenager he purchased shares, and in the 60’s of the last century he began to purchase shares of the Berkshire Hathaway company which was then active in the field of textiles, and over the years he increased his holdings. Today the market value of the company on the New York Stock Exchange is 645 billion dollars.