Warren Buffett's financial powerhouse, Berkshire Hathaway, has delivered a robust performance with a significant uptick in operating earnings, rising by 40% in the third quarter, despite facing an immense investment loss mainly due to a downturn in its substantial Apple holdings.
The conglomerate's operating earnings, derived from its diverse range of subsidiaries including insurance, railroads, and utilities, soared to $10.8 billion in the last quarter, a marked increase from the $7.7 billion recorded in the same quarter of the previous year. The company's ability to ramp up operating profits underscores the strength of its core businesses, which have weathered the economic tremors caused by the pandemic, geopolitical strife, and rampant inflation.
The Omaha-based behemoth reported a net loss, largely attributed to a $23.5 billion investment loss. This net loss stands at $12.8 billion, a steep descent from last year's $2.8 billion loss in the same period. This reflects the volatile nature of investment gains and losses which the company emphasized should not unduly sway investor sentiment.
"Our operating businesses continue to be affected by an array of challenges, including the ongoing pandemic, geopolitical conflicts, and inflation," the company noted, alluding to the unpredictable economic impacts that have become a feature of global markets.
Yet, amidst these economic headwinds, Berkshire's cash reserves ballooned to an all-time high of $157 billion. Buffett's astute navigation of the current financial climate saw the firm capitalizing on surging bond yields, accumulating $126.4 billion in Treasury bills with a minimum yield of 5%.
The investment in Treasuries reflects Buffett's earlier comments following Fitch Ratings' downgrade of US credit, where he expressed continued confidence in U.S. government debt. "The only question for next Monday is whether we will buy $10 billion in 3-month or 6-month [Treasury notes]," Buffett had remarked in an interview with CNBC.
Notably, Berkshire's buyback activity decelerated, with only $1.1 billion spent on repurchases in the third quarter. This is part of a $7 billion buyback scheme that has spanned nine months, slowing down as Berkshire's shares reached a record high, before witnessing a 6% dip from the peak.
The insurance sector within Berkshire Hathaway, particularly its subsidiary Geico, reported an underwriting profit of $1.053 billion, marking a substantial rebound from a loss the previous year. However, BNSF, Berkshire's railroad arm, faced a 15% decline in earnings amid rising costs and shrinking volumes.
Berkshire's forays abroad have also proven fruitful, with increased stakes in Japan's top trading companies, aligning with Japan's stock market reaching a 33-year peak. Charlie Munger, Berkshire's Vice Chair, likened the investments to divine providence, "It was like having God just opening a chest and just pouring money into it," he said on the Acquired podcast.
As of Friday's close, Berkshire Hathaway Class A shares have seen a rise of nearly 14% this year, trailing behind the S&P 500, even as markets speculate on the Fed's next moves concerning interest rates. The robust operating earnings and strategic maneuvers indicate a steady hand at the wheel, even as Buffett's conglomerate navigates an uncertain investment landscape.
