made a big bet on other stocks in the first quarter, and energy was a favorite.
Warren Buffett’s company bought $51.1 billion worth of stock during the quarter, according to the company’s 10-Q filing. Among the purchases were billions of dollars of
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Berkshire also reported on Saturday that its first-quarter after-tax operating profit was $7 billion in the first quarter, up less than 1% from the year-ago period as the company cut buying back its shares as the stock price rose.
Berkshire Hathaway (ticker: BRK/A, BRK/B) repurchased $3.2 billion of its own shares in the first quarter, compared to $6.9 billion in the fourth quarter of 2021. The company repurchased $27 billion of dollars worth of stocks in 2021.
The earnings report was released ahead of the start of Berkshire’s annual meeting in Omaha on Saturday when CEO Warren Buffett and vice-chairmen Charlie Munger, Greg Abel and Ajit Jain took questions from Berkshire shareholders for several hours. .
Longtime Berkshire shareholders are watching the meeting closely to hear the latest news from the investor who has helped them achieve huge returns over the years.
Berkshire’s operating profit, which excludes paper gains or losses on the company’s huge stock portfolio, totaled about $4,773 per Class A share in the first quarter, up 4% from the same period, according to Barron’s estimates. Earnings beat the consensus estimate of $4,277 per Class A share. The per-share gain in operating earnings reflects Berkshire’s buybacks that reduced its share count over the past year.
Overall earnings totaled $5.5 billion, or $3,702 per Class A share, compared to $11.7 billion, or $7,638 per share in the prior year period. Total profit was lower than operating profit in the first quarter due to falling paper in Berkshire’s large stock portfolio in a weaker stock market. In the prior year period, there were paper earnings in stock holdings.
Buffett tells investors to focus on operating profits, not overall profits, because total profits include paper gains and losses in Berkshire’s stock portfolio and do not reflect basic earnings power of the company.
The $3.2 billion in redemptions during the period comes as no surprise to Berkshire watchers, as redemptions totaled around $2 billion in the first two months of the year based on the number of shares disclosed in the company’s proxy statement issued in March. Investors are focusing on the buybacks as an indication of Buffett’s view on the attractiveness of Berkshire stocks.
The slight increase in first-quarter operating profits reflects higher profits from Berkshire’s rail business – the company owns the Burlington Northern Santa Fe – as well as its large utility and energy company, Berkshire Hathaway Energy. Profits also rose in the company’s vast manufacturing, service and retail businesses, but insurance underwriting profits fell sharply.
Berkshire shares have been strong this year, with Class A shares rising 7% to $484,340 on Friday. That’s well ahead of the S&P 500 index, which is down about 13%. Berkshire Class B shares ended at $322.83. Berkshire’s stock took a hit in Friday’s market selloff, with B shares falling 3.7%.
Net purchases of shares of other companies were $41.4 billion after share sales during the period. It was likely Berkshire’s largest quarterly stock purchase ever and included a purchase of about $7 billion of Occidental Petroleum stock during the period.
Berkshire was also a big buyer of Chevron, buying what appears to be around $21 billion from the energy giant. Berkshire’s stake in Chevron totaled $25.9 billion on March 31, according to 10-Q, down from $4.5 billion on December 31.
The 10-Q does not indicate the number of Chevron shares Berkshire held on March 31, but Barrons estimates the total at 160 million shares, or an 8% stake.
The huge purchases will likely surprise many Berkshire investors since Buffett had been less enamored with stocks in 2021, with Berkshire being a net seller of $7 billion in stocks. With the big buys, the stock portfolio reached a record $390.5 billion on March 31, up $40 billion from December 31, 2021.
With the large stock purchases, Berkshire’s total cash and cash equivalent holdings fell to $106 billion on March 31 from $147 billion on December 31.
Book value was $345,000 per Class A share as of March 31 Barrons estimates, up from around $343,000 per share at the end of 2021.
Berkshire is now trading at 1.4 times its estimated book value as of March 31. The current book value is likely lower than the March 31 figure due to the decline in the stock market since then.
(AAPL), which is Berkshire’s largest equity holding, is down 9% so far in the second quarter.
It does not appear that Berkshire purchased any appreciable amount of its own stock from March 31 through April 20, based on the April 20 share count reported in the 10-Q. The number of shares shown for April 20 is approximately the same as the 1.47 million equivalent Class A shares outstanding as of March 31 Barrons calculated.
Berkshire shares were trading at near-record highs in the first three weeks of April, and Buffett apparently decided to put buybacks on hold. Buybacks slowed in March compared to February as the share price rose. Buffett told Berkshire investors he would be price-conscious during share buybacks.
Berkshire’s auto insurance unit Geico had a weak quarter as it posted an underwriting loss of $178 million, compared with a profit of $1 billion in the year-ago period.
“GEICO’s pre-tax underwriting loss in the first quarter of 2022 reflects increased claims severity, primarily due to significant cost inflation in automotive markets, which accelerated in the second half of 2021,” said said Berkshire. Other auto insurers are pressured by the same trends. Geico’s written premiums increased by 2.6% during the period.
Burlington Northern’s pretax profits rose 9% to $1.8 billion during the period, while manufacturing profits rose 16% to $2.8 billion.
Write to Andrew Bary at [email protected]