Berkshire Hathaway (BRK.B) $292

Loss to date: 8.8%

We highlighted Berkshire Hathaway (BRK.B:NYSE), the investment vehicle controlled by Warren Buffett, on 17 February 2022 due to its attractive mix of businesses and its large cash pile which topped $100 billion at the end of March.

WHAT’S HAPPENED SINCE THEN?

Due to the sell-off in markets in the second quarter, the share prices of Berkshire’s three biggest listed holdings – Apple (AAPL:NASDAQ), American Express (AXP:NYSE) and Bank of America (BAC:NYSE) – all fell, reducing the value of the portfolio from $391 billion at the end of March to $328 billion at the end of June.

That meant the firm reported a ‘paper’ loss of almost $44 billion for the quarter, despite a strong operating performance by its businesses which increased their revenues from $69.1 billion to $76.2 billion.

More importantly, the profitability of its
owned businesses also improved with operating earnings climbing to $9.28 billion from $6.69 billion last year.

Buffett has long maintained that Berkshire’s earnings are a better measure of the quality of the company than its paper gains and losses, which as the last quarter has shown can vary greatly.

Due to its broad spread of domestic interests, from insurance to retail and railroads, Berkshire is often seen as a reflection of the broader US economy so a strong operating performance would seem to suggest fears of a recession are somewhat premature.

Interestingly, after buying over $50 billion of stocks in the first quarter including oil producer Chevron (CVX:NYSE) and printer-maker HP (HP:NYSE), Berkshire slowed its spending during
the second quarter.

It also reined in buying its own shares, spending $1 billion against $3.7 billion in the previous quarter.

WHAT SHOULD INVESTORS DO NOW?

Since July, the share prices of Apple, American Express and Bank of America have rallied meaning most of the second-quarter losses will likely be reversed. Meanwhile, Berkshire’s operating results have demonstrated the strength of its underlying businesses.

Investors should sit tight and let the shares continue their recovery.

‹ Previous2022-08-11Next ›