Tuesday, January 19

Warren Buffett’s Berkshire Hathaway grew profits by 86% last quarter as its stock portfolio soared in value

Warren BuffettMario Anzuoni/Reuters

  • Warren Buffett’s Berkshire Hathaway suffered an 11% drop in revenue in the second quarter, but almost $30 billion in year-on-year investment gains meant its net income surged 86% to $26.3 billion.
  • The famed investor’s conglomerate reported about $13 billion in net stock sales last quarter, including its disposal of the “big four” airline stocks in April.
  • Berkshire also repurchased more than $5 billion of its stock as expected.
  • However, its cash pile still ballooned by about $10 billion to $147 billion.

Warren Buffett’s Berkshire Hathaway reported a surge in profits in the second quarter as the soaring value of its stock portfolio offset weakness across much of its business due to the coronavirus pandemic.

The famed investor’s conglomerate also sold more than just the “big four” airline stocks last quarter, and added about $10 billion to its enormous cash pile.

Berkshire reported an 11% slump in revenues to about $57 billion as sales dropped in both the “insurance and other” and “railroad, utilities and energy” divisions. It also stomached an impairment charge of roughly $10 billion tied its acquisition of Precision Castparts in 2016.

“The government and private sector responses to contain its spread began to significantly affect our operating businesses in March and adversely affected nearly all of our operations in the second quarter,” Buffett and his team wrote in the earnings release.

However, those declines were offset by close to $30 billion in year-on-year investment gains, meaning Berkshire’s net income soared 86% to $26.3 billion.

Selling stocks and buying Berkshire

Berkshire reported $12.8 billion in net stock sales last quarter, including the $6.1 billion it received from selling the “big four” airline stocks in April.

The conglomerate will publish its portfolio as of June 30 in a regulatory filing next week, detailing exactly which positions it sold down or exited.

As predicted, Buffett also repurchased more than $5 billion of Berkshire stock last quarter, a big step up from his $1.6 billion in buybacks during the first quarter.

However, his company’s cash pile still grew by about $10 billion to $147 billion, after ballooning by around $9 billion in the first quarter.

Buffett was widely expected to put Berkshire’s cash to work during the coronavirus crash earlier this year. However, the 89-year-old investor highlighted a lack of attractive opportunities at Berkshire’s annual meeting in May, as the Federal Reserve and US Treasury moved quickly to pump liquidity into markets and bail out struggling companies.

His inactivity spurred commentators to dismiss him as too old, too scared, and in need of a new strategy.

However, Buffett has been more lively in recent weeks. For example, Berkshire struck a $10 billion deal to buy most of Dominion Energy’s natural-gas assets in early July.

Moreover, he spent more than $2 billion buying Bank of America stock over 12 consecutive trading days to August 4, boosting Berkshire’s stake in the bank to almost 12%.

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