Berkshire Hathaway, led by legendary investor Warren Buffett, has announced a substantial increase in third-quarter operating earnings. The company also revealed a record-high cash reserve, reflecting Buffett’s cautious approach to dealmaking opportunities.
Robust Q3 Earnings: Berkshire Hathaway’s operating earnings, which encompass profits from its diverse portfolio of wholly-owned businesses, such as insurance, railroads, and utilities, reached $10.761 billion in the last quarter. This represents a remarkable 40.6% surge compared to the same period last year.
Record Cash Reserves: As of the end of September, Berkshire held an unprecedented $157.2 billion in cash reserves, surpassing the previous record of $149.2 billion set in the third quarter of 2021. Warren Buffett, often referred to as the “Oracle of Omaha,” has taken advantage of rising bond yields by investing in short-term Treasury bills yielding at least 5%. The company’s Treasury bill investments now amount to $126.4 billion, a substantial increase from about $93 billion at the end of the previous year.
Share Buybacks: While Berkshire Hathaway’s shares reached record highs during the quarter, share buyback activity slowed down. The company spent $1.1 billion on repurchasing shares, bringing the total for the first nine months of the year to approximately $7 billion. Notably, Berkshire Class A shares have shown impressive gains of nearly 14% this year, although they experienced a slight dip of about 6% after reaching an all-time high in September.
Business Performance: Berkshire’s insurance subsidiary, Geico, reported another profitable quarter with underwriting earnings of $1.1 billion. The auto insurer is in the midst of a turnaround effort after losing market share to competitors, including Progressive. However, BNSF, Berkshire’s railroad division, experienced a 15% decline in earnings due to lower volumes and higher costs.
Investment Loss: Berkshire Hathaway did post a significant investment loss of $24.1 billion in the third quarter, primarily stemming from a decline in its substantial Apple stake. Despite a decline of 11.7% in Apple shares during the quarter, they have rebounded by over 3% since.
Long-Term Perspective: As is customary, Berkshire Hathaway urged investors to focus on the bigger picture and not be swayed by quarterly fluctuations in the company’s equity portfolio. The company stated that the extent of investment gains or losses in a given quarter is often insignificant and can lead to misleading figures for net earnings per share.
Acknowledging Challenges: While celebrating its robust earnings, Berkshire Hathaway also acknowledged the economic challenges posed by the pandemic, geopolitical risks, and inflation pressures. The company highlighted the impact of government and private sector actions to combat the economic effects of COVID-19 and its variants, along with geopolitical conflicts and supply chain disruptions. These factors, along with government measures to control inflation, continue to influence the company’s operating businesses, although their long-term effects remain uncertain.
