Buffett’s Berkshire loses money as stocks and Hurricane Ian offset higher demand From Health & Fitness Journal

©Health & Fitness Journal. FILE PHOTO: Stockholders shop for discounted products at the Berkshire Hathaway annual stockholders meeting in Omaha, Nebraska, U.S., May 4, 2019. REUTERS/Scott Morgan/File Photo

By Jonathan Stamp

(Health & Fitness Journal) – Warren Buffett’s Berkshire Hathaway (NYSE:) Inc on Saturday posted a $2.69 billion third-quarter loss as rising inflation, falling equity investments and a big loss from Hurricane Ian undermined improvement in many businesses of the conglomerate.

Operating profit, meanwhile, rose 20% as Berkshire benefited from increased demand and prices for sales of new homes, industrial products, and energy, while rising interest rates helped generate more income from insurance investments.

Berkshire took advantage of declining stock markets to add more stocks to its $306 billion portfolio, making $3.7 billion net purchases in the quarter and building a now 20.9% stake in oil company Occidental Petroleum Corp (NYSE:) on.

It also repurchased more of its own stock but was cautious, repurchasing $1.05 billion similar to the second quarter.

The Omaha, Nebraska-based conglomerate’s cash on hand ended September at $109 billion, up from $105.4 billion in June. The company spent $11.6 billion last month to buy an insurance company, Alleghany (NYSE:) Corp.

Berkshire’s conservatism may reflect the “significant disruptions” it says it still sees in supply chains and from events it cannot control, such as the COVID-19 pandemic and the Russia-Ukraine conflict.

It also said rising costs hurt results at two of its best-known companies, BNSF railroad and Geico car insurer.

‘HUNKERING DOWN’

“The concern is which of the rising spending will become more permanent,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pa., which invests more than $1 billion in Berkshire.

Russo said the results reflect “a company ducking and sparing resources while waiting for big ‘elephants,'” a term Buffett uses to describe large acquisitions.

Quarterly net loss was $1,832 per Class A share, compared to earnings of $10.34 billion, or $6,882 per share, a year ago.

Operating income increased to $7.76 billion, or about $5,294 per Class A share, from $6.47 billion, or $4,331 per share, in the prior year.

Results were supported by a stronger US dollar, which added $858 million to the value of Berkshire’s non-US dollar debt, and a 21% increase in income from insurance investments.

Revenue from US Treasuries and other debt nearly tripled to $397 million as the Federal Reserve aggressively raised short-term interest rates to fight inflation.

Berkshire Hathaway Energy’s earnings rose 6% and manufacturing, services and retail companies, including Clayton Homes, rose 20%. However, Berkshire said higher mortgage rates are likely to hurt future home sales.

This helped offset a $2.7 billion after-tax loss from Ian, a powerful Category 4 hurricane that struck Florida on September 28. Insurance modelers and executives said storm damage could well exceed $50 billion.

In 2022, Berkshire’s stock has outperformed the stock, falling just 4% compared to the index’s 21% decline.

BNSF, GEICO

Profit at BNSF fell 6% as expenses rose by a third, including an 80% increase in fuel costs, some of which the railways passed on to customers through surcharges.

Geico, meanwhile, suffered its fifth straight quarterly underwriting loss, reflecting “significant cost inflation” on the back of claims claims, used car prices and auto parts shortages.

Net results included $10.45 billion in losses from investments and derivatives as stock prices fell at many major Berkshire investments other than Apple Inc (NASDAQ:).

Accounting rules require Berkshire to report the changes even if it doesn’t buy and sell anything. This leads to large quarterly fluctuations in earnings, which Buffett says are usually meaningless.

Buffett, 92, has run Berkshire since 1965.

Investors watch Berkshire for its reputation and because the results of its dozens of operating units often reflect broader economic trends.

These units also include real estate agents and consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and See’s Candies.