Warren Buffett's Berkshire Hathaway had a record amount of cash at the end of the third quarter, but due to weak stock market gains, the company's reported net loss widened.
The renowned investor, based in Omaha, Nebraska, had a record $157.2 billion in cash and equivalents at the end of the third fiscal quarter, up from $147.4 billion at the end of the second fiscal quarter and surpassing the record high of $149.2 billion set two years ago.
Most of them are investments in short-term US treasury bond bonds. The company stated in a securities document that interest and other investment income in the third quarter increased by $1.3 billion compared to the same period last year, mainly due to an increase in short-term interest rates.
If Buffett, the CEO and Chairman of Berkshire Hathaway, identifies an attractive acquisition opportunity, then these reserve funds will enable Berkshire to respond quickly. Charlie Munger, the vice chairman of Berkshire Hathaway and Buffett's long-term business partner, recently stated in an interview with The Wall Street Journal that there is a "at least 50% chance" of the two of them making another major acquisition.
If they want to trade, they must have money on hand, "said Cathy Seifert, an analyst at CFRA Research
Berkshire Hathaway repurchased $1.1 billion of its own stocks in the third quarter and approximately $1.4 billion in the second quarter. The company's Class A shares closed at a record high of $563072.75 on September 19th. Last Friday's closing price was $533815, which has risen by 14% this year.
Berkshire Hathaway reported a net loss of $12.8 billion, or a loss of $8824 per Class A share. By comparison, the same period last year saw a loss of $2.8 billion, or $1907 per share. Investment losses increased from $10.4 billion in the same period last year to $23.5 billion. Berkshire Hathaway operates multiple companies, including insurance company Geico, railway company BNSF Railway, and sportswear manufacturer Brooks Running.
Berkshire Hathaway's operating profit (excluding certain investment performance) increased to $10.8 billion from $7.7 billion in the same period last year. The profitability of Berkshire Hathaway's insurance underwriting business has improved, with insurance investment returns increasing, while the profitability of its railway and utility and energy departments has declined.
Geico announced that its underwriting business achieved pre tax profit in the third fiscal quarter, compared to a loss in the same period last year. Berkshire Hathaway stated that this performance is due to an increase in average premiums per car policy and a decrease in claim frequency.
The decline in railway freight volume has dragged down BNSF's profits.
Buffett once stated that operating profit can better measure the company's performance. Accounting rules require Berkshire Hathaway to include unrealized gains and losses in its investment portfolio when reporting net profit, so when the stock market falls, it can drag down Berkshire Hathaway's performance, even if the company's basic business performs well.
Berkshire stated in a securities regulatory announcement: "We believe that the investment gains and losses on equity securities investments... are usually meaningless for understanding our quarterly or annual performance or evaluating the economic performance of our operations
With the surge in longer-term government bond yields providing investors with new options to earn returns, the gains in the US stock market in 2023 were reversed in the third quarter. In the three months ended September, the S&P 500 index fell by 3.6%.
Berkshire's largest holdings in Apple's stock fell 12% during the quarter. Other Berkshire stocks with significant holdings also fell in price: American Express fell 14%, Coca Cola fell 7%, and Bank of America fell 4.6%. The stock prices of these four stocks have turned upward in the fourth quarter.
Berkshire's fifth largest holding stock is Chevron, which rose 7.2% in the third quarter, supported by rising oil prices. In recent weeks, Chevron's stock price has fallen due to the drop in oil prices.