- Warren Buffett's Berkshire Hathaway reported second-quarter earnings on Saturday.
- The investor's company was less active in the stock market and slowed its share buybacks.
Warren Buffett's Berkshire Hathaway disclosed a strong performance from its operating businesses, less activity in the stock market, and a slower rate of share repurchases, in its second-quarter earnings on Saturday.
The famed investor's conglomerate posted a 10% year-on-year increase in revenues to about $76 billion, driving pre-tax earnings from its operating businesses up 16% to $10 billion. However, a $67 billion drop in the value of its investment portfolio meant Berkshire swung to a $43 billion net loss on a headline basis.
Buffett's company spent a net $3.8 billion on equities in the period, as it bought $6.2 billion worth and sold $2.3 billion worth. That represents a sharp slowdown from the net $41 billion it plowed into stocks in the first quarter. On the other hand, Berkshire was a net seller of stocks in both 2020 and 2021.
Berkshire spent only $1 billion on buybacks last quarter, down from about $3.2 billion in the first quarter, and upwards of $6 billion in each of the five quarters before then.
The reduced expenditures helped to keep Berkshire's cash pile almost flat at $105 billion. It shrunk by 28% to $106 billion in the first quarter.
Notably, Berkshire revealed that it purchased Greg Abel's roughly 1% stake in Berkshire Hathaway Energy for $870 million in June, lifting its ownership of the subsidiary to about 92.1%. Abel is Berkshire's vice-chairman of non-insurance operations, and Buffett's planned successor as CEO.
Buffett and his team struggled to find bargains during the first two years of the pandemic, as stocks soared to record highs, private equity firms and special-purpose acquisition companies (SPACs) drove up the price of acquisitions, and Berkshire's climbing stock price made its shares less enticing to repurchase.
However, Berkshire has boosted its buying in recent months. It has plowed about $10 billion into Occidental Petroleum stock over the course of just 29 trading days this year. It also more than quadrupled its Chevron stake to around 8% in the first quarter, and struck a deal in under two weeks to acquire Alleghany for about $12 billion.
"The businesses demonstrated broad revenue strength, but investment income was also quite strong, up $825 million year on year," James Shanahan, a senior equity analyst at Edward Jones, told Insider about Berkshire's latest earnings.
"Berkshire is benefiting from higher interest rates as well as increased dividend income," Shanahan continued. "Recent large investments in Chevron, Occidental Petroleum, and HP will contribute substantially to investment income in the second half of 2022."