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Josh Funk AP business writer
Warren Buffett’s company reported a loss of $43.76 billion in the second quarter as investment paper prices slumped, but Berkshire Hathaway’s many operating companies performed well overall, as the overall economy kept pace with inflation and rising interest rates.
Berkshire said Saturday that a largely unrecognized $53 billion decline in the value of its investments forced it to report a loss of nearly $44 billion, or $29,754 per share. That’s down from $28.1 billion, or $18,488 per share, a year ago.
Berkshire’s three biggest investments — Apple, American Express and Bank of America — all fell sharply in the second quarter. But these stocks rebounded in the third quarter, meaning Berkshire’s portfolio is worth more than it was at the end of the quarter.
Buffett believes Berkshire’s operating income is a better measure of a company’s performance because it accounts for investment gains and losses, which can vary from quarter to quarter. By that measure, Berkshire’s revenue was up sharply to $9.28 billion, or $6,312.49 per Class A share, from $6.69 billion, or $4,399.92 per Class A share, last year.
The four analysts surveyed by FactSet expected Berkshire to report operating income per share of $4,741.64.
In addition to investments, Berkshire owns more than 90 companies. Berkshire said operating profit grew at all of its major divisions, including its insurance companies, major utilities and BNSF Railroad. The strong results at most of its companies led to a pre-tax loss of $487 million at Geco, which reported a large auto loss due to rising vehicle prices and an ongoing shortage of auto parts.
CFRA research analyst Cathy Seifert said the GICO results indicate the auto insurer is having more trouble recouping higher costs than peers Progressive and Allstate, so “I think it’s definitely worth a look.”
Berkshire is often seen as a microcosm of the broader economy because its diverse collection of manufacturing, retail, insurance, utility and service businesses touch many different industries, and Berkshire’s profits tend to follow whatever the economy does. Edward Jones analyst Jim Shanahan said Berkshire’s strong operating results suggested many businesses were able to raise prices enough to offset rising inflation, and that even higher interest rates were hurting Berkshire’s auto dealer network and its manufactured home division and other parts of the company. You are benefiting from high rates of investment.
“This is a business that has its tentacles in all parts of the economy. To show such broad revenue and earnings strength throughout the franchise gives me a lot of confidence that the broader economy is doing well,” Shanahan said.
Berkshire said its revenue rose more than 10 percent to $76.2 billion in the quarter.
Berkshire had $105.4 billion in cash at the end of the quarter, down slightly from the $106 billion it reported at the end of the first quarter. Even though Buffett reported investing billions in the second quarter, he wasn’t buying many stocks. In the first three months of the year, Berkshire spent more than 51 billion dollars on stocks.
Berkshire spent $1 billion buying back its own shares during the quarter, but the pace of those buybacks slowed significantly. Berkshire bought back $3.2 billion of its stock in the first quarter and $27 billion last year. such as oil producers Occidental and Chevron, and printer HP Inc. Before this year’s slew of stock buybacks, Buffett’s recent purchases were his biggest investments as he struggled to find big buys.
Berkshire’s drought ended this year when it signed on to acquire Allegany for $11.6 billion.
An interesting tidbit revealed in a Berkshire Securities and Exchange Commission filing is that the company acquired Berkshire Vice Chairman Greg Abel in Berkshire’s utilities division for $870 million in June. Abel is set to take over as Berkshire’s chief executive if Buffett is unavailable, although the legendary 91-year-old investor has no plans to retire. The filing did not provide any indication of what Abel would do with the money, including reinvesting it in Berkshire shares.
Some investors have asked Abel to increase his Berkshire investment before taking over as CEO, so he has a bigger stake in the company’s future. At last report, Abel held five Class A shares and about 2,400 Class B shares. Compare that to Buffett, who owns 229,016 A shares and 276 B shares to control more than 30% of Berkshire’s voting stock.
Fortune 500 and 1,000 companies in Omaha
Berkshire Hathaway
Level of opportunityNo. 7 with $276 billion in revenue; One place down from last year. First cracked Fortune’s list in 1989 at No. 205.
HistoryThe company, which owns large and mid-sized firms and investments, grew out of the singular wisdom of Chairman and CEO Warren Buffett. It started as a family and friends investment pool in Omaha in the mid-1950s. In the year In 1965, Buffett bought the textile company that gave Berkshire its name. (Ironically, he later called it a very bad investment.) His philosophy of buying successful companies in strong positions and maintaining leadership has outperformed the stock market. Buffett’s foray into insurance was key, as he used premium reserves available for investment to fund additional purchases. Forbes says Berkshire generates nearly three-quarters of its revenue from its non-financial businesses. At 87, Buffett is the oldest CEO of a Fortune 500 company. The company has maintained offices in Omaha’s Kiwiit Plaza since 1962.
Brandon Sullivan, World-Herald
Union Pacific
Chance LevelNo. 163 on $21.8 billion in revenue; It is down 10 points from last year. In the year It has been listed annually since non-manufacturing companies were added to the list in 1995.
HistoryThe company was created by the Pacific Railroad Act of 1862, an act of Congress that called for the construction of a transcontinental railroad from the Missouri River to the West Coast. The first track was laid in Omaha in 1865, and UP grew into a national icon. Several mergers over 150 years have helped UP assemble the nation’s largest rail network with major rail connections in 23 western states and Mexico. In the year In 2004, the railroad opened a new 19-story headquarters downtown to house 2,900 of the company’s 42,000 employees.
Rebecca S. Gratz, World-Herald
Peter Kwitt Sons’ Inc.
Chance LevelNo. 313 with revenue of $12.1 billion; 70 places down from last year. In the year Fortune debuted in 1991 and has been listed every year since 1998. Privately held, however, qualifies for Fortune’s list because it publicly reports its earnings.
HistoryPeter Kwitt’s three sons took over their father’s Omaha construction company, Little Peter, making it one of the nation’s largest. The company was involved in the construction of military facilities during World War II and the Cold War. He also built more miles of the interstate system than any other contractor, prompting Fortune to label Peter Kwitt the “Colossus of the Streets.” Today, it is one of the largest employee-owned firms in the world and one of the few construction companies large enough to take on billion-dollar projects.
Sarah Hoffman, World-Herald
Omaha Insurance Mutual
Chance LevelNo. 324 with revenue of $11.4 billion; 42 places down from last year. In the year It debuted in 1995, dropped in 2006 and 2007, but has been on the list ever since.
HistoryIt began modestly in 1909 as a mutual benefit health and accident association, initially struggling to attract policyholders. Under the leadership of Creighton medical student CC Criss and later VJ Skutt, it grew and became a leading provider of health and casualty insurance in the 1950s. In the year In 1962, the name was changed to Mutual of Omaha, and a year later it became a household name through its sponsorship of the popular “Wild State” television show. The company In 2001, he expanded the iconic Native American logo to the bank in 2007 and renewed his commitment to the downtown Omaha headquarters by developing Midtown Crossing. In the year In 2020, it adopted a new logo depicting a lion as it nods like “Wild Kingdom”.
Jeff Bundy, Herald of the World
Valmont Industries
Chance LevelNo. 750 on $3.5 billion in revenue; Up to 16 places from last year.
HistoryIn the year In 1946, Robert B. Daugherty spent his life savings – $5,000 – to build a small manufacturing company near a valley to build a farm elevator. Years later, with the invention of center-pivot irrigation, Valmont found its niche. Then it was extended to the production of steel pipes and tubes for irrigation systems and other industries. Through acquisitions and new constructions, the company has become a global player in certain agricultural, communication and consumer markets. Today, Valmont’s global operations are constantly looking for opportunities to expand its four business sectors: engineering support structures (steel and aluminum poles for traffic lights, street lights, etc.); Utility support structures (poles of electric transmission lines, etc.); Irrigation and coatings (galvanization).
Kent Sievers, Herald of the World
Green Fields Inc.
Chance level: No. 870 with revenue of $2.8 billion; 107 places from last year.
Sarah Hoffman, World-Herald
Werner Enterprises
Chance LevelNo. 892 on $2.7 billion in revenue; 21 places down from last year.
Werner Enterprise
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