- Third-quarter operating income up 41%
- Record cash pile despite $1.1 billion buyback
- Stock portfolio drops $24 billion
Omaha-based conglomerate Berkshire Hathaway (BRK.B:NYSE) reported a 41% increase in third-quarter operating earnings to $10.7 billion on Saturday 5 November.
The company continued to repurchase shares, spending a further $1.1 billion through the quarter, which means the Sage of Omaha has bought in around $7 billion of Berkshire stock in the first nine months of the year.
This means profits were distributed among fewer shares, helping boost operating earnings per share by 43% in the quarter compared with 2022. Operating earnings per share are now 65% higher than 2019, before the start of the pandemic.
Berkshire has stated previously that it intends to buy back shares only when they are trading below its ‘conservatively determined’ intrinsic value.
SHARE LOSSES ‘NOT MEANINGFUL’
On a reported basis, the company generated a net loss for the quarter to 30 September of $12.7 billion compared with $2.8 billion in the same period in 2022.
The reported number includes changes in the value of Berkshire’s publicly-quoted share portfolio, which notched-up losses of $24 billion in the quarter largely due to an 11% fall in the value of the firm’s stake in Apple (APPL:NASDAQ).
While they can be considerable, short-term movements in the value of Berkshire’s share portfolio such as the drop in Apple are not considered a meaningful measure of value.
‘The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings (losses) per share that can be extremely misleading to investors who have little or no knowledge of accounting rules’, the company said.
Over the quarter, Berkshire was a net seller of publicly-quoted shares to the tune of $5.3 billion.
RECORD AMOUNTS OF CASH
Despite continued share repurchases, the company ended the third quarter with a record cash pile of $157.2 billion sitting on its balance sheet.
Buffett has been taking advantage of rising US treasury yields which have topped 5%, increasing the company’s stake in government securities to $126.4 billion from $94 billion at the end of last year.
The company’s significant insurance operations also benefited from rising yields, with investment income up 75% year-on-year as it continues to recover from depressed levels.
Berkshire’s stock price increased by 2.6% in the quarter compared with a loss of 3.3% for the S&P 500 index. Year-to-date the shares are up 13.5% compared with a 14% gain for the benchmark.
