Warren Buffett’s Berkshire Hathaway Inc. has reported a first-quarter profit of $35.5 billion, largely driven by gains from common stocks like Apple Inc.[0] The company’s income from investments has also bolstered its operating profit, leading to an increase of 13% to $8.07 billion, or about $5,561 per Class A share, compared to $7.16 billion in the same period last year.[1]
Berkshire Hathaway’s insurance business also rebounded, with Geico achieving a remarkable turnaround by generating $703 million in earnings. Higher average premiums earned, paired with lower advertising expenses and claim frequencies, contributed to this positive outcome.[2] With that frame of reference, Buffett commented that he expects the insurance sector to perform solidly, due to its relatively low correlation with economic business activity.[2]
Berkshire Hathaway’s cash pile also swelled to more than $130 billion, up from $128 billion at the end of last year.[1] After subtracting purchases, the company earned $10.4 billion from selling equities in the quarter.[1] However, Berkshire also repurchased $4.4 billion worth of stock, the most since the first quarter of 2021, up from $2.8 billion at the end of last year, signaling the company’s confidence in its future prospects.[3]
Despite the impressive earnings results, Buffett’s commentary about the economy somewhat conflicted with the earnings results of the Berkshire conglomerate, where operating earnings for Q1 2023 increased 13% YoY versus the respective period in 2022 despite the unfavorable economic backdrop.[2] From January to March, the Berkshire conglomerate generated $8.07 billion in operating earnings, with support from a rebounding insurance sector.[2]
Berkshire Hathaway also sold an estimated $6 billion worth of Chevron stock last quarter, as disclosed in its earnings report.[4] However, the company continues to invest in stocks, with Buffett expressing his fondness for Apple, Berkshire’s largest equity position.[0] He commented that it’s “better than any business” Berkshire owns outright, and that the iPhone’s “moat” with consumers makes it an “extraordinary product.”
As for first-quarter operating earnings, they came in at $8.065 billion, and insurance underwriting totaled $911 million.[0] Furthermore, Berkshire Hathaway’s insurance investment surged by a remarkable 68%, increasing from $1.170 billion to $1.969 billion.[5] Berkshire Hathaway’s portfolio experienced significant success with Geico, showcasing an underwriting profit of $703 million.
How will Berkshire’s capital allocation and stock buyback policy be affected by the increase in cash reserves?[6] Is there a possibility for the company to declare a cash dividend for its common shares?[6] These questions remain to be answered, but with a succession plan in place and Vice Chairman Greg Abel scheduled to succeed Buffett as CEO, Berkshire Hathaway appears to be in good hands for the future.[7]
0. “Berkshire Hathaway Posts $35.5 Billion Profit, Cash Rises to $130 Billion” Investopedia, 6 May. 2023, https://www.investopedia.com/berkshire-hathaway-annual-meeting-2023-7494837
1. “Warren Buffett’s Berkshire Hathaway reports solid rise in earnings after Geico finally swings to profitability” Fortune, 6 May. 2023, https://fortune.com/2023/05/06/warren-buffett-berkshire-hathaway-earnings-geico/
2. “Berkshire Dumps Billions Worth Of U.S. Stocks, Buys Treasuries Instead (BRK.A) (BRK.B)” Seeking Alpha, 7 May. 2023, https://seekingalpha.com/article/4601257-warren-buffett-berkshire-hathaway-dumps-billions-worth-us-stocks-buys-treasuries
3. “Berkshire Hathaway Earnings: Acquisitions and Better Investment Performance Lift Overall Results” Morningstar, 6 May. 2023, https://www.morningstar.com/articles/1155694/berkshire-hathaway-earnings-acquisitions-and-better-investment-performance-lift-overall-results
4. “Warren Buffett’s Berkshire Hathaway reveals it sold about $6 billion of Chevron stock last quarter” msnNOW, 7 May. 2023, https://www.msn.com/en-in/money/markets/warren-buffetts-berkshire-hathaway-reveals-it-sold-about-dollar6-billion-of-chevron-stock-last-quarter/ar-AA1aRr5t
5. “Berkshire Hathaway Earnings – Is Buffett Losing Faith in U.S. Stocks?” TipRanks, 7 May. 2023, https://www.tipranks.com/news/berkshire-hathaway-earnings-is-buffett-losing-faith-in-u-s-stocks
6. “Berkshire Earnings Rise Solidly On Geico Revival; Warren Buffett Leads Shareholder Meeting | Investor’s Business Daily” Investor’s Business Daily, 6 May. 2023, https://www.investors.com/news/berkshire-earnings-q1-2023-brkb-stock-warren-buffett-esg
7. “Warren Buffett’s Berkshire Hathaway posts $35.5-billion Q1 profit, buys back more stock” Business Today, 6 May. 2023, https://www.businesstoday.in/technology/news/story/warren-buffetts-berkshire-hathaway-posts-355-billion-profit-buys-back-more-stock-380290-2023-05-06