Berkshire Hathaway Reports Record Operating Profit Despite Stock Losses

Berkshire benefited from rising interest rates, which increased yields on its vast U.S. Treasury bill holdings to over 5%.

Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) reported its first quarterly loss in a year due to falling stock prices, particularly in Apple (AAPL.O) and other stocks in its portfolio.

Despite this loss, the company’s operating profit reached a record high, driven by improved results from its insurance businesses.

Berkshire benefited from rising interest rates, which increased yields on its vast U.S. Treasury bill holdings to over 5%.

Additionally, fewer car accidents and a quiet Atlantic hurricane season boosted the performance of Geico, the company’s car insurance subsidiary, and its reinsurance businesses.

Operating profit for the quarter increased by 41% to $10.76 billion, although Berkshire’s net loss quadrupled to $12.77 billion.

The company also expressed caution about stock valuations and the overall market environment.

Berkshire’s cash reserves reached a record $157.2 billion, providing the company with the means for potential large acquisitions.

Berkshire sold more stocks than it purchased and reduced its own stock repurchases to $1.1 billion.

Consumer confidence showed signs of decline due to inflation concerns, higher borrowing costs, and political instability.

This impacted various Berkshire subsidiaries, including its real estate brokerage, building products units, and sales of Forest River RVs and Fruit of the Loom apparel.

However, Berkshire’s acquisition of Jazwares, a toymaker known for Squishmallows, helped offset some of the challenges by generating $469 million in revenue during the quarter.

Investors closely monitor Berkshire’s results as they often reflect broader economic trends, and Warren Buffett’s reputation as a renowned investor adds to the company’s significance.

Berkshire continues to exercise caution in deploying its cash reserves, emphasizing the importance of patience in investment decisions.

Berkshire reported a net loss of $12.77 billion for the quarter, equivalent to $8,824 per Class A share, mainly due to investment losses, notably a decline in Apple’s stock price.

However, its operating profit reached $10.76 billion, or $7,444 per Class A share, up from the previous year.

Insurance operations, including Geico, showed significant profit improvement, and BNSF railroad, one of Berkshire’s major profit generators, saw a modest decline in net income.

While some challenges persist in consumer-related businesses, Berkshire maintains its cautious approach to managing its substantial cash reserves.

Geopolitical risks remain a concern, but certain subsidiaries, such as IMC metalworking, have not seen significant effects from international conflicts.

Warren Buffett, who has led Berkshire since 1965, continues to be a prominent figure in the investment world, with a net worth ranking fifth globally according to Forbes magazine.

Berkshire Hathaway’s shares have performed well, matching the Standard & Poor’s 500 (S&P 500) with a 14% increase this year.