Warren Buffett and the remainder of Berkshire Hathaway‘s (BRK.A -2.94%)(BRK.B -2.55%) senior management group welcomed tens of 1000’s of traders again to Omaha this weekend for the corporate’s first in-person shareholder assembly since 2019. And as Berkshire does earlier than each annual shareholder assembly, the corporate gave traders a glimpse of its first-quarter earnings.
With that, listed here are among the most necessary takeaways from the report, and why Berkshire’s earnings report does not inform the entire story.
Berkshire’s earnings declined … or did they?
At first look, the numbers may counsel Berkshire had a horrible quarter. Its web revenue within the first quarter was $5.46 billion, in comparison with $11.71 billion within the first quarter of 2021.
Nonetheless, as Buffett was fast to level out on the assembly, in contrast to many public corporations, Berkshire likes to inform shareholders how a lot the corporate actually earned.
The large distinction between the primary quarter of this yr and the comparable 2021 interval is that Berkshire’s inventory investments typically declined. Because of an accounting rule, Berkshire is required to incorporate unrealized good points and losses in its earnings calculations. Within the first quarter of 2021, Berkshire’s shares elevated in worth by $4.7 billion, whereas they declined by $1.58 billion within the first quarter of this yr. However Berkshire hasn’t truly misplaced something — its portfolio simply modified in worth.
Trying on the earnings of Berkshire’s working companies, the corporate earned somewhat over $7 billion for the quarter, which truly represents a slight achieve over final yr, regardless of a considerably tougher setting for the corporate’s insurance coverage companies. Particularly, underwriting income from GEICO plunged in comparison with 2021, when far fewer vehicles had been on the highway as a result of pandemic.
Buffett and Munger nonetheless assume Berkshire is reasonable
Berkshire’s share buyback plan permits Buffett and longtime accomplice Charlie Munger to purchase again shares with Berkshire’s capital every time they each agree it’s buying and selling considerably under its intrinsic worth. And regardless of Berkshire’s inventory performing fairly nicely all through the primary quarter, the corporate spent about $3.1 billion shopping for again its personal inventory.
Berkshire’s share depend has declined by about 4% over the previous yr because of buybacks — not precisely probably the most aggressive tempo of any public firm, but it surely’s nonetheless a robust signal that Buffett and Munger are keen to place billions of Berkshire’s capital into buybacks.
Picture supply: Getty Pictures.
Berkshire’s money stockpile declined
We additionally received a take a look at Berkshire’s money place as of the top of the primary quarter. And to the delight of shareholders who’ve been ready for Berkshire to place a few of its money to work, it truly declined — and by a major quantity.
Berkshire ended 2021 with over $140 billion in money on its stability sheet, and this has now declined to “solely” $106 billion. Buffett revealed on the shareholder assembly that the corporate deployed $51 billion into shares (a few of this got here from Berkshire’s working revenue).
There’s fairly a bit that’s not within the letter
As a last level, it is necessary to say that among the most necessary developments to happen in Berkshire’s first quarter aren’t in its earnings report.
Particularly, whereas we all know Berkshire was a web purchaser of shares for the primary time in a number of quarters, we do not know the entire specifics of the inventory portfolio. We all know Berkshire bought massive quantities of Occidental Petroleum, HP, and Chevron, however there may very well be important new positions we can’t know till Berkshire information its Kind 13-F in a pair weeks.
