Reported by Wu Bin, a 21st Century Economic Reporter, from Shanghai
In a turbulent market environment, the net profit of Berkshire Hathaway, owned by Warren Buffett, has once again fluctuated sharply, with a huge investment loss of $24.1 billion in the third quarter. However, operating profit has increased significantly, and the total amount of cash held has set a record.
On November 4th local time, Berkshire released a financial report that showed revenue of $93.21 billion in the third quarter, higher than the market's expected $89.18 billion, an increase of 21% from $76.93 billion in the same period last year; The net loss for the third quarter was $12.767 billion, compared to a net loss of $2.688 billion in the same period last year. This is Berkshire's first quarterly loss this year, and it still achieved a profit of $58.649 billion in the first three quarters.
Behind the sharp fluctuations in Berkshire's net profit, it is because the gains and losses from investments and derivatives also need to be included in the financial statements. In contrast, Berkshire places greater emphasis on the operating profits of its physical businesses such as railways and energy. In the third quarter, Berkshire's operating profit was $10.76 billion, a year-on-year increase of 40.6%, compared to $7.65 billion in the same period last year, with a market expectation of $8.95 billion.
Although Berkshire's operating profit increased significantly in the third quarter, it admitted that it was also under multiple pressures such as inflation and geopolitical risks, and currently cannot reasonably estimate the long-term economic impact.
A huge investment loss of $24.1 billion in the third quarter
Behind Berkshire's significant investment loss of $24.1 billion in the third quarter, it was mainly due to the significant drop of 11.6% in the top heavy stock, Apple, in the third quarter. However, Berkshire still achieved a cumulative profit of $23.5 billion in the first three quarters.
Driven by factors such as soaring US bond yields, the Nasdaq fell 4.12% in the third quarter, the S&P 500 index fell 3.65%, and the Dow fell 2.62%. Berkshire's A-share market has rebounded nearly 14% this year, reaching a historic high of $566600 on September 19th. Subsequently, the stock price has fallen by about 6% from its peak.
As Berkshire's stock price surged to a historic high in the third quarter, repurchase activity continued to slow down. Berkshire repurchased $1.1 billion of shares in the third quarter, and has accumulated approximately $7 billion of shares so far this year. After Berkshire's total asset size exceeded $1 trillion for the first time in the second quarter, its total assets decreased to $1019.933 billion in the third quarter, reaching $1041.573 billion at the end of June this year.
Berkshire's financial report also shows that as of September 30th, approximately 78% of the fair value of equity investments were concentrated in five companies, namely Apple ($156.8 billion), Bank of America ($28.3 billion), American Express ($22.6 billion), Coca Cola ($22.4 billion), and Chevron ($18.6 billion).
Record breaking cash total of $157.2 billion
Due to Buffett hardly seeing any trading opportunities in the third quarter, Berkshire's total cash at the end of September reached a historic high of $157.2 billion, surpassing the $149.2 billion high set in the third quarter of 2021.
Overall, there have been few recent investments by Buffett. According to documents submitted by Berkshire to the Securities and Exchange Commission (SEC) on October 5th, approximately 3.07 million shares of HP stock were sold on October 3rd, cashing out approximately $80.4 million. Berkshire still holds approximately 97.9 million shares of HP stock. After this sale, Berkshire's stake in HP has decreased to below 10%, and if it continues to reduce its stake in HP, it will no longer need to file with the SEC.
Behind Buffett's "meat cutting" holdings in HP, the sluggish personal computer market and the decline in HP's stock price may be the main reasons. As of the close on November 3rd, HP's stock price was $27.42. Last spring, when Berkshire first purchased HP stock, its stock price was around $30, which also means that Buffett's multiple holdings since the third quarter have already suffered some losses.
In addition, a document submitted by Berkshire to the SEC on October 25th showed that Berkshire purchased 3.9 million shares of Western Petroleum common stock, increasing its holdings to 228 million shares, with a total value of $14.5 billion. Berkshire's shareholding in Western Petroleum has reached 25.8%.
However, Buffett currently has no intention of acquiring Western Oil. At Berkshire's annual shareholders' meeting in May this year, Buffett dispelled external speculation, praising Western Oil and its CEO Vicki Hollub, but expressing no interest in acquiring Western Oil.
Buffett's love for energy stocks is evident. In addition to continuously increasing its holdings in Western oil, in July this year, Berkshire invested $3.3 billion to increase its stake in Cove Point LNG, a Maryland liquefied natural gas company, and held a 75% stake as a limited partner.
While Buffett made few investment moves, Berkshire has been making use of the soaring bond yield to earn income and has purchased short-term treasury bond with a yield of at least 5%. At the end of the third quarter, the holding value was $126.4 billion, far higher than about $93 billion at the end of last year.