After a rampant start to 2022, Berkshire Hathaway (NYSE:BRKa) cooled off its equities investment spree in the second quarter of 2022, regulatory filings posted on Saturday August 6 show.
Kicking the year off with a US$51.1bn spend in the first three months, Warren Buffett’s multinational conglomerate reduced spending to US$6.2bn in the latest quarter, bringing total equities investments for the first half up to US$57.3bn.
This was partially offset by proceeds of US$12bn from sales of securities.
Berkshire’s extensive railroad portfolio increased 9.8% year on year in the second quarter, while its manufacturing, service and retailing businesses increased 8.2%.
Automobile insurance unit Geico was hit with US$487mln in pre-tax underwriting losses due to an increase in claims frequency and severity.
Bear market takes a bite out of Berkshire
The bear market has taken a considerable toll on Berkshire’s bottom line.
After-tax losses on investments of US$54.4bn were logged in the first half of 2022, “substantially all of which occurred in the second quarter,” according to the company’s earnings report.
While that amounted to net losses attributable to shareholders of US$38.3bn, shareholders’ equity still stood at US$461.2bn as of June 30.
Operating earnings of US$9.3bn — underscored by currency gains on non-US dollar debt — did little to offset net losses, but Berkshire played down the quarterly losses in favour of the bigger picture.
“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said in a news release.
An assessment of Berkshire’s warchest supports that statement: Cash and cash equivalents on the balance sheet amount to over US$101bn, 75% of which is held in US Treasury bills.
A US$1bn share buyback was also conducted in June to shore up investor confidence.
Slowdown not a surprise
According to the Financial Times, this slowdown in spending was to be expected, and is likely to continue for the rest of the year.
In April, 91-year-old Warren Buffett suggested that multibillion-dollar stock purchases were on the backburner, saying that the atmosphere in the company’s headquarters had become more “lethargic”.
Quartnerly losses aside, Class-A common stock in Berkshire Hathaway (BRK-A) has significantly outperformed the US indexes this year, falling 2.7% against the S&P 500’s 13% and NASDAQ’s 20%