Buffett’s Berkshire is recovering from the depths of the pandemic and buying back more shares
© Reuters. FILE PHOTO: Berkshire Hathaway chairman Warren Buffett walks through the exhibition hall as shareholders gather to hear from the billionaire at Berkshire Hathaway Inc’s annual shareholders meeting in Omaha
From Jonathan stamp
(Reuters) – Warren Buffett’s Berkshire Hathaway (NYSE 🙂 Inc said Saturday that its profits are recovering from the worst effects of the COVID-19 pandemic and that it is increasing its aggressive share buybacks with new buybacks of $ 6.6 billion. USD extended.
A 20% increase in operating profit for the first quarter suggests the Omaha, Nebraska-based conglomerate, which includes dozens of companies including BNSF Railroad and Geico Auto Insurance, may have already suffered the worst of the pandemic, which included the loss of ten out of thousands of jobs.
In fact, Berkshire said many companies have “significantly higher” profits and revenues while others like Precision Castparts’ aircraft parts are still struggling.
“The results have been really good,” said Jim Shanahan, an Edward Jones & Co analyst with a “Buy” rating for Berkshire. “The introduction of vaccination and the broad economic recovery are evident in Berkshire’s franchise.”
The $ 6.6 billion share buybacks in the quarter allow Buffett to leverage excess capital as high valuations and special-purpose acquisition company growth make it difficult to acquire entire companies.
Further buybacks are likely to have taken place March 31 through April 22 as the number of Berkshire stocks declined, potentially exceeding $ 1.2 billion. Berkshire repurchased $ 24.7 billion of its own shares in 2020.
“It shows that Buffett isn’t too close to Berkshire’s valuation metrics and that he’s confident about the future,” said Tom Russo, a partner at Gardner Russo & Quinn in Lancaster, Pennsylvania, which Berkshire has owned since 1982.
Quarterly operating income rose to $ 7.02 billion, or approximately $ 4,600 per Class A share, from $ 5.87 billion a year ago.
Net income of $ 11.71 billion, or $ 7,638 per Class A share, compared to a net loss of $ 49.75 billion, or $ 30,653 per share, last year.
Last year’s results reflected $ 55.62 billion in asset and derivative losses as global equity markets slumped.
Despite the buybacks, Berkshire ended March with $ 145.4 billion in cash, in part because it sold $ 3.9 billion more shares than it bought in the quarter.
The largest holdings of stocks, Apple Inc (NASDAQ 🙂 and Bank of America Corp (NYSE :), were $ 110.9 billion and $ 40 billion, respectively.
Berkshire’s Class A shares are up 19% this year, outperforming those after falling sharply in 2020.
Buffett and Vice Chairman Charlie Munger will host Berkshire’s annual meeting on Saturday afternoon.
BRING EVERYTHING BACK HOME
Manufacturing increased pre-tax profit 15%, with Clayton Homes mobile housing earnings nearly doubling as revenue increased and expected credit losses decreased.
Russo expects further improvements in home-related businesses. “Between Johns Manville [insulation]Berkshire, Acme Brick, Benjamin Moore Paint and Shaw Carpets, has the entire housing sector at its sweet spot, “he said.
Pre-tax profits from retailers like Nebraska Furniture Mart and See’s Candies more than doubled, while Berkshire dealerships sold more vehicles and some results exceeded pre-pandemic levels despite supply chain disruptions.
Geico’s underwriting profit increased 4% as fewer people drove and fewer accidents. This made up for lower premiums resulting from loan renewals.
“The results in the insurance segment have been most impressive,” said Shanahan. “Geico is not growing as fast as Progressive (NYSE :), but underwriting performance has improved significantly after failing to meet our expectations last year.”
BNSF revenues were largely unchanged as higher shipping volumes of food and consumer goods offset lower demand from energy companies for oil and sand.
“It looked like price competition had increased, with rail volume increasing but sales decreasing slightly,” said Cathy Seifert, an analyst at CFRA Research.
Berkshire Hathaway Energy’s profits rose 25%, including gas pipeline assets recently acquired by Dominion Energy.
Precision remained an issue even after a $ 9.8 billion write-off and 13,400 job losses in 2020.
Quarterly sales were down 36%, and Berkshire said sales and earnings should remain “relatively low” in 2021 as aircraft production is unlikely to grow significantly.