Warren Buffett’s Berkshire controls stock purchases and reports a loss of $ 43.8 billion

Warren Buffett of Berkshire Hathaway slowed new investment drastically in the second quarter after it picked up pace earlier this year as a sell-off on the US stock market saw the insurance-rail conglomerate lose $ 43.8 billion.

Berkshire said Saturday that the downturn in global financial markets had hit a stock portfolio, which fell to $ 328 billion from $ 391 billion at the end of March. The $ 53 billion booked loss in the three months to June far outstripped the positive quarter for his businesses, improving their profitability.

Company records with U.S. securities regulators showed new stock purchases fell to around $ 6.2 billion in the quarter, compared to the $ 51.1 billion it spent between January and March – a spurt that surprised shareholders Berkshire. Berkshire has sold $ 2.3 billion in shares in the last three-month period.

Berkshire also spent $ 1 billion buying back its own shares in June, a common tactic when Buffett and his investment team find less attractive targets in the market.

The 91-year-old investor signaled at the company’s annual Omaha meeting in April that the multibillion-dollar stock buying craze is likely to ease off over the course of the year, saying that the atmosphere at the company’s headquarters had become more “lethargic”.

Cash, Cash Equivalent, and Short-Term Treasure Held ($ Billion) column chart showing the Berkshire Hathaway War Chest

Investors will receive more detailed information on changes to Berkshire’s stock portfolio later this month when the firm and other big money managers disclose their investments to regulators. Separate documents show that the company has increased its stake in the energy company Occidental Petroleum in recent months.

Berkshire’s massive cash and treasury holdings have changed little since late March, falling from less than $ 1 billion to $ 105.4 billion.

While net income fell from $ 5.5 billion in profit at the start of the year to $ 43.8 billion in loss, operating profit – excluding the gains and losses in Berkshire stock positions – rose 39 percent to $ 9.3 billion. This included $ 1.1 billion in non-dollar currency gains.

Berkshire is committed to considering fluctuations in the value of its equity and derivative portfolio as part of its earnings each quarter, an accounting policy that Buffett warned about could make the company’s earnings figures look “extremely misleading” and volatile.

The loss was $ 29,754 per series A share. This is in contrast to the $ 18,488 earnings per share the company recorded a year earlier.

Line chart showing results since the beginning of the year (%) showing Berkshire has overtaken the wider US stock market this year

Berkshire’s performance is being analyzed by analysts and investors for signs of the health of the broader US economy as its operations cover a large part of the country’s industrial and financial heart.

Inflationary pressure continued to bite, although many of its divisions were able to pass on higher prices to customers. The BNSF railway, which Buffett described as one of Berkshire’s “four giants,” saw a 15 percent increase in revenue as fuel surcharges on customers offset the decline in shipping volumes. Fuel costs for BNSF, which has more than 32,500 miles of railroad track in 28 states, increased by more than 80 percent year-on-year.

The Geico insurance unit posted an insurance loss of $ 487 million pre-tax this quarter, compared with three months earlier. The division attributed the greater loss to the much higher prices for new cars and auto parts it has to pay when its customers are involved in accidents.

Buffett in April said the company was seeing the effects of inflation first-hand, warning it was “cheating almost everyone.”

Berkshire housing companies, including the modular housing unit Clayton Homes and home furnishings retailer Nebraska Furniture Mart, have provided guidance on how consumers respond to higher prices and higher mortgage rates. Furniture sales were relatively flat and higher prices compensated for smaller orders.

Nevertheless, the housing market showed signs of recovery, with new Clayton sales increasing 9.8 percent in the first half of the year. Division revenues rose 28 percent to $ 3.4 billion in the second quarter compared with the prior year.

“The rise in home mortgage rates is likely to slow down demand for new home construction, which could negatively affect our business,” warned Berkshire. “Continued disruptions in the supply chain and significant increases in the cost of many raw materials and other inputs, including energy, freight and labor, continue to negatively affect us.”

Berkshire referred to a potential conflict raised at the company’s annual meeting earlier this year. In June, it spent $ 870 million buying shares that Berkshire vice president Greg Abel, Buffett’s anointed successor, owned directly in the power unit.

Abel joined the company in 2000 when Berkshire acquired the MidAmerican Energy company and owned some of its assets in that company rather than in shares of its Berkshire parent company.

Berkshire Hathaway’s A-class common stock has fallen approximately 2 percent this year, surpassing the 13 percent drop in the S&P 500 index.

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