berkshire hathaway

Yesterday Berkshire Hathaway (NYSE: BRK.B) released its earnings for the third quarter of 2022. Here are the key takeaways from the Q3 2022 earnings of the conglomerate.

Berkshire Hathaway reported revenues of $76.93 billion in the third quarter of 2022, a YoY rise of almost 9%. The company’s operating profits increased 20% over the period to $7.76 billion.

The company reported an insurance investment income of $1.408 billion in the quarter which was above the $1.16 billion in the corresponding quarter last year. It however posted a loss of $962 million underwriting loss due to the losses associated with Hurricane Ian.

The conglomerate’s earnings from the railroad business also slumped to $1.44 billion, down from $1.54 billion in the third quarter of 2021. Meanwhile, despite positive operating income in the quarter, Berkshire Hathaway posted a net loss of $2.69 billion.

The losses were led by the massive loss in its stock portfolio. Accounting laws mandate Berkshire to report mark-to-market gains and losses on its stock portfolio which lead to massive volatility in its earnings.

Berkshire Posted Better Than Expected Results in the Third Quarter

Berkshire’s chairman Warren Buffett has said multiple times though that operating income is a better indicator of the company’s earnings. The third quarter operating income was ahead of what analysts were expecting.

In the third quarter of 2022, Berkshire reported a $10.45 billion loss on its stock portfolio. The metric was $53 billion in the previous quarter as the markets slumped. So far, the portfolio is down $63.9 billion in the first nine months of the year.

Apple is the largest holding for Berkshire Hathaway and Buffett added even more shares in the first half of 2022. Like Berkshire, Apple is also outperforming the markets this year. The iPhone maker is also the best-performing FAANG stock of 2022. We have a guide on how beginners can buy Apple stock.

Notably, Apple’s September quarter earnings came late last month. Most tech majors disappointed markets with their earnings that week.

Microsoft too tumbled after the earnings release. While the company’s earnings were better than expected, its guidance spooked markets. However, most analysts have a buy rating on Microsoft stock and believe that the company’s long-term outlook is quite bullish.

Warren Buffett Scaled Back on Stock Buybacks in Q3

In the third quarter of 2022, Berkshire Hathaway repurchased $1.05 billion worth of its shares which was similar to the previous quarter. In the first nine months, the Warren Buffett-led company has repurchased $5.25 billion worth of its shares.

The buybacks are a pale shadow of what we saw in 2020 and 2021. Between these two years, Berkshire repurchased almost $50 billion worth of its shares. However, this year, Buffett has poured money into stocks and the company was a net buyer of stocks in the first and second quarters.

Berkshire has loaded up on oil stocks like Chevron and Occidental Petroleum. It now holds over 20% of Occidental Petroleum and beginning the fourth quarter it would start consolidating its earnings. Berkshire has the regulatory approval to increase its stake in Occidental to 50%.

Meanwhile, as Buffett spent aggressively on buying stocks, the conglomerate’s cash pile is off its highs. At the end of September, it held $109 billion in cash which was still higher than the $105.4 billion that it held at the end of the second quarter.

Berkshire Hathaway Sold More BYD Shares

Berkshire Hathaway has been trimming its stake in BYD, the China-based automaker. BYD surpassed Tesla to become the largest seller of NEVs (new energy vehicles). In August BYD began delivering The BYD Seal which is similar to Tesla’s best-selling Model 3 sedan. However, the model is priced at $10,000 below that of Tesla’s Model 3. BYD expects to sell 4 million Seal cars in 2023.

We’ll get to know about Berkshire’s Q3 2022 buying and selling activity later this month when it releases its third-quarter 13F.

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