General
August 6, 2023
4 minutes read

Warren Buffett’s Berkshire Reports Record Operating Profits, Cash Pile

Berkshire Hathaway (NYSE: BRK.A), the American conglomerate chaired by famous investor Warren Buffett, has released its earnings report for this…

Berkshire Hathaway (NYSE: BRK.A), the American conglomerate chaired by famous investor Warren Buffett, has released its earnings report for this year’s second quarter. The company reported record operating profits and a swelling cash pile.

Berkshire reported a $36bn operating profit in this year’s second quarter, compared to a $44bn loss in the same quarter last year. Most of the profit comes from the appreciation of assets held by Berkshire. The Nebraska-based conglomerate has significant equity stakes in many companies, such as iPhone maker Apple, beverage giant Coca-Cola, and oil giant Occidental Petroleum. It owns many other companies outright, such as insurer Geico and railroad giant BNSF Railway.

Excluding investment gains, Berkshire reported $10bn in operating profits in the quarter, bolstered by underwriting and investment income from its insurance division. Profits from BNSF Railway fell 24%, and earnings from the company’s energy division stayed flat compared to the same period of the previous year.

Berkshire ended the quarter with $147bn in cash and cash equivalents, compared to $105bn in the same quarter last year. This figure represents the second-highest cash pile held by the Buffett-chaired conglomerate, only surpassed by the $149bn it had in late 2021.

Berkshire sold nearly $13bn of shares in the second quarter and bought roughly $5bn worth. The company also spent $1.4bn on share buybacks during the second quarter, down from $4bn in the previous quarter.

A swelling cash pile indicates that Buffett and his Berkshire proteges didn’t find many worthwhile investment opportunities outside treasury bills and bonds. The conglomerate has slowed down its spending on stocks and outright acquisitions this year.

In 2022, Berkshire spent $34bn on stocks on a net basis and acquired Alleghany, a New York-based insurer, for $12bn. In contrast, Berkshire sold $18bn of shares on a net basis in the first six months of 2023. Treasury bills and bonds are a relatively safe way to park cash until Berkshire identifies new investment opportunities.

This week, Fitch, a “big three” credit rating agency, downgraded the U.S. government’s long-term debt from AAA to AA+, citing rising deficits and “a steady deterioration in standards of governance over the last 20 years.” However, Buffett told CNBC he wasn’t worried about the downgrade and that Berkshire was still buying U.S. treasuries as usual.

Berkshire Hathaway was originally a textile manufacturer established in the 1800s. Buffett began buying Berkshire stock in the 1960s and took over management in 1965. He transformed the textile manufacturer into America’s largest conglomerate with over $300bn in annual revenue.