Berkshire Hathaway's results beat expectations for Q2, but the company posts more than 40 billion loss on investments

08.08.2022 16:18|Conotoxia Ltd Analyst Team

Berkshire Hathaway is a holding company that operates as an investment vehicle for well-known investor Warren Buffett. The company has exposure to industries such as freight, insurance, energy, food and more.

Berkshire's strategy for years has been to buy attractively valued companies. BH then restructured them, improving efficiency and investing in key areas of the business, resulting in a high potential return on investment.

The company's operating profit was $9.3 billion in the second quarter, beating Wall Street analysts' expectations. That's an increase of 39%, taking into account the $6.7 billion profit from a year ago. Accordingly, earnings per share (EPS) also seemed to be a big surprise. It came in at $6,312 (43% year-on-year growth) versus the expected $5,393. This was attributed to the good condition of the insurance and rail transportation businesses in particular.

The company continued its slow share buybacks, allocating $1 billion, down sharply from $3.2 billion a year ago. Warren Buffett appears to be cautious about carrying out buybacks. According to Barron's data, the company did not buy back any shares in April and May, when their price was near historic highs. Buybacks resumed in July when the shares tumbled.

Despite excellent operating results, the company posted a gigantic $43.8 billion loss on investments. This caused up to 21% declines in the value of shares of Berkshire's three major portfolio companies - Apple, Bank of America and American Express.

Warren Buffett asked investors not to focus on quarterly fluctuations. This relates to Warren Buffett's long-term value-type strategy of investing for the long term and not paying much attention to volatility. The main measure is the fundamental value of a company.

“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,” the board announced in a statement.

The conglomerate's Class A shares (main shares issued) fell more than 22% in the second quarter. Berkshire continues to beat the market, losing 2.5% over the year, while the S&P 500 is down 13.5%. All three recommendations gathered by MarketScreener say "buy" or "hold." Their average target price is $525.03k, implying a potential upside of 19.5% from the current price. In addition to the main Class A shares, Class B shares (in the form of CFDs and DMAs) are available on the Conotoxia MT5 platform, whose closing price on Friday did not exceed $300.

 

Rafał Tworkowski, Junior Market Analyst, Conotoxia Ltd. (Conotoxia investment service)

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

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71.98% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71.98% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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