In perhaps the best sign so far this US reporting season of the growing recovery in the US economy, Warren Buffett’s Berkshire Hathaway saw a strong rebound in its March quarter’s operating earnings.
At the same time the company maintained its buybacks, snapping up more than $US6 billion worth of shares in the three months.
While not the earnings surge we saw last week from tech giants like Apple and Amazon, Berkshire reported operating income of $US7.018 billion in the first quarter was up a solid 20% from $US5.871 billion in the same period a year ago.
Including $US4.7 billion of share price gains in the quarter Berkshire reported net income of $US11.71 billion compared with a year-earlier net loss of $49.75 billion.
Last year’s March quarter results reflected $US55.62 billion of losses on investments and derivatives, as stock markets worldwide plunged in the early days of the pandemic.
The conglomerate’s total revenue was $US64.6 billion last quarter, up from the $US61.26 billion in the first Covid-hit three months of 2020.
The company’s 90 plus businesses from insurance to transportation, utilities retail, car sales and manufacturing enjoyed the growing signs of a recovery as the US economy grew an annual 6.1% in the quarter.
At the same time, Buffett again found it impossible to spend the tens of billions of dollars in surplus cash and instead continued to buy back shares, as it did in 2019 and especially 2020.
During the first quarter, the company bought back $US6.6 billion of Berkshire shares, after a record $US24.7 billion in buybacks last year.
Berkshire bought back $US9 billion of its shares in the final three months of 2020.
Analysts said that Berkshire looks like it bought another $US1.2 billion of shares in the first three weeks of April (because the number of shares on issue fell).
This is perhaps the best sign that Buffett, the world’s most followed investor, continues to see his own company as a better investment than the stockmarket or elsewhere in the economy.
In spite of the buyback splurge, Berkshire ended March with $US145.4 billion of cash, in part because it sold $US3.9 billion more in stocks in the quarter than it bought.
Its largest share holdings were Apple (US110.9 billion at March 31) and Bank of America ($40 billion).
Thanks to the buyback program and the recovery in its operating businesses (and the economy), Berkshire’s shares are up more than 18% so far in 2021 to a record high (as at April 30).
That’s well in advance of the 11.3% rise in the S&P 500.
That outperformance is a change from the performance in 2019 and 2020 when the shares failed to keep pace with the key index.
Berkshire shares have easily outperformed those of Apple, its biggest investment. So far in 2021, Apple shares are down just under 1% and they lost more than 2% last week alone despite smashing revenue, profit and March quarter sales records for the iPhone, Mac and iPad.
