Warren Buffett’s Berkshire stock purchases and books a $43.8bn loss

Warren Buffett’s Berkshire Hathaway dramatically reduced new investment in the second quarter. Blister speed Earlier in the year, a US stock market sell-off pushed the insurance-to-rail group to a $43.8bn loss.

Berkshire said on Saturday that the slump in global financial markets weighed heavily on its equity portfolio, which fell to $328bn from $391bn at the end of March. A bookings loss of $53bn in the three months to June was more than an upbeat quarter for its businesses, which boosted their profits.

New share purchases fell to about $6.2bn in the quarter, according to the company’s filing with US securities regulators. spent $51.1 billion This surprised Berkshire shareholders — between January and March. Berkshire sold $2.3bn of shares in the latest three-month period.

Berkshire spent $1bn to buy back its own shares in June, a tactic commonly used by Buffett and his investment team when they find less attractive targets in the market.

The 91-year-old investor signaled at the company’s annual meeting in Omaha in April that multibillion-dollar stock buybacks would slow as the year progressed, saying the atmosphere at the company’s headquarters had become too “lethargic.”

Investors will get a detailed update on how Berkshire’s stock portfolio has fared later this month, when the firm and other big money managers disclose their investments to regulators. The company has increased its stake in energy giant Occidental Petroleum in recent months, separate filings show.

Berkshire’s huge cash and treasury holdings were little changed since the end of March, falling less than $1bn to $105.4bn.

While net income fell to a loss of $43.8bn from a profit of $5.5bn at the start of the year, operating income excluding fluctuations in Berkshire’s stock levels rose 39 per cent to $9.3bn. That includes currency-related gains of $1.1bn in its non-US dollar debt.

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Berkshire must include changes in the value of its stock and derivatives portfolio as part of its earnings each quarter, an accounting rule that Buffett warned could make the company’s earnings figures “highly misleading” and volatile.

There was a loss of $29,754 per Class A share. This contrasts with earnings per share of $18,488 reported by the company a year ago.

Year-to-date performance (%) line chart showing how Berkshire has outperformed the broader US stock market this year

Berkshire’s results are being scrutinized by analysts and investors for signs of the health of the broader U.S. economy, as its businesses undercut much of the country’s industrial and financial heart.

Inflationary pressures continued to bite, although several of its divisions were able to pass on higher prices to customers. BNSF Railroad, described by Buffett as one of the “four giants” in the Berkshires, reported a 15 percent increase in revenue as fuel surcharges charged to customers offset a drop in fleet volumes. Fuel costs for BNSF, which has more than 32,500 miles of rail tracks in 28 states, have risen more than 80 percent year over year.

Insurance unit Geico posted a pre-tax underwriting loss of $487mn in the three-month-ago quarter. The segment blamed higher prices for new cars and auto parts for the higher losses.

In April, Buffett said the company was looking directly at the effects of inflation, which he warned was “cheating on almost everyone.”

Berkshire’s housing businesses, including modular home unit Clayton Homes and home furnishings retailer Nebraska Furniture Mart, offered hints about how consumers will respond to higher prices and increased mortgage rates. Furniture sales were relatively flat, with higher prices compensating for lower orders.

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Still, the housing market showed signs of strength, with Clayton’s new home sales up 9.8 percent in the first half of the year. The division’s revenue rose 28 percent to $3.4 billion in the second quarter from a year earlier.

“An increase in home mortgage interest rates could reduce demand for new home construction, which would adversely affect our businesses,” Berkshire warned. “We continue to be negatively impacted by continued supply chain disruptions and significant cost increases for many raw materials and other inputs, including energy, freight and labor.”

Berkshire noted a potential conflict raised at the company’s annual meeting earlier this year. In June, Berkshire vice-chairman Greg Abel, Buffett’s anointed successor, spent $870mn to buy a stake he held directly in its energy division.

Abel joined the company when Berkshire bought MidAmerican Energy in 2000, and kept part of his fortune in that business instead of shares in the Berkshire parent company.

Shares of Berkshire Hathaway’s Class A common stock have fallen roughly 2 percent this year.

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