Not even an investor like the legendary Warren Buffett could avoid the full impact of the slide in stockmarkets in the June quarter.
The double digital slide in markets slump crunched his Berkshire Hathaway’s bottom line, which saw Berkshire post a $US43.8 billion loss.
But that accounting rule disguised another improvement in Berkshire’s operating profit thanks to better results from its huge insurance arm and the BNSF railroad business.
Quarterly operating profit rose 39% to $US9.28 billion, from $US6.69 billion in the same quarter of 2021.
For the first six months of 2022 Berkshire’s operating earnings rose 19% to $US16.323 billion thanks to better returns from insurance, the BNSF railroad and the company’s sprawling industrial businesses.
Revenue for the quarter was $US63.05 billion, up around 11% from $US57.2 billion a year ago. For the first half of 2022, revenue totalled $US122 billion, up more than 10%.
While Berkshire again repurchased its own shares in the quarter, that was only $US1 billion and took total buybacks this year so far to $US4.2 billion.
Thanks to the accounting rule covering actual and probable losses (on a mark to market basis) the company posted a $US53 billion loss on its investments during the June quarter as the S&P 500 index fell 16% in the quarter. It has since risen almost 10% from the end of June.
Buffett again asked investors to not focus on the quarterly fluctuations in its equity investments.
“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said in a statement.
Berkshire had a massive cash hoard of $US105.4 billion at the end of June even though he spent billions in the quarter.
Buffett has been steadily adding to his Occidental Petroleum stake since March, giving Berkshire a 19.4% stake worth about $US10.9 billion (see separate story).
Occidental has been the best-performing stock in the S&P 500 this year, more than doubling in price on the back of higher oil prices.
In late March, the company said it agreed to buy insurer Alleghany for $US11.6 billion.
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Meanwhile Berkshire Hathaway revealed a significant purchase involving its Vice Chairman Greg Abel who is next in line to succeed Buffett as CEO.
The statement revealed that Abel had sold his 1% stake Berkshire Hathaway Energy subsidiary for $US870 million ($A1.24 billion).
In its quarterly report, Berkshire said the energy unit bought out Abel in June under an agreement among them and the family of the late US billionaire philanthropist Walter Scott, which still owns an 8% stake.
Berkshire revealed it took a $US362 million charge to capital, reflecting the premium over how much the stake’s value was reflected on its books.
Berkshire now owns 92% of Berkshire Hathaway Energy, whose businesses include energy, utility and pipeline operations and a large US real estate brokerage.
Scott, an Omaha native, was a longtime Berkshire director and Buffett friend who died in September 2021 at age 90.
Abel’s sale suggests that the Scott family’s stake may be worth $US7 billion.
Abel started at Berkshire Hathaway Energy, then known as MidAmerican Energy, in 1992, eight years before Berkshire took control.
He became MidAmerican’s chief in 2008, and 10 years later, Berkshire’s vice chairman overseeing its dozens of non-insurance businesses.
Buffett turns 92 on August 30. He said told the Berkshire online annual meeting in May last year that if he stepped down, Abel would become Berkshire’s CEO.
