Berkshire Hathaway Earnings Up 20%; Warren Buffett Keeps Buybacks Light| Investor’s Business Daily

Berkshire Hathaway earnings for the third quarter rose 20% on an operating basis while the bear market took a toll on investments. Warren Buffett’s Berkshire Hathaway (BRKB) cash pile grew as buybacks remained relatively modest.

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Warren Buffett further loaded up on Occidental Petroleum (OXY) during the quarter.

Revenue and earnings for Buffett’s Berkshire derive from diverse operating companies and equity investments.

Operating earnings — Buffett’s preferred measure for assessing performance — rose 20% in Q3 vs. a year earlier to $7.76 billion. That’s vs. a 39% gain in Q2 to $9.28 billion.

Berkshire appeared to top operating EPS estimates. Analysts polled by FactSet expected Berkshire to earn $2.81, down 2.3% vs. a year ago.

Berkshire lost $962 million in Q3 from insurance underwriting, perhaps reflecting some impact from Hurricane Ian, which slammed Florida in late September. But insurance investment income rose to $1.41 billion.

Rail earnings slid 6% vs. a year earlier.

Berkshire Hathaway lost a net $2.69 billion in Q3, reflecting a $10.45 billion loss in investments amid the ongoing bear market. In Q2, Berkshire posted a $53 billion loss on investments.

Berkshire’s stock portfolio includes a monster stake in iPhone maker Apple (AAPL) besides a large and growing one in OXY stock. He kept grabbing more Occidental shares over Q3, taking his stake in the oil and gas producer to nearly 21% at the end of September. That came after Buffett’s Berkshire bought nearly 6 million OXY shares in Q1 as well as nearly 121 million more Chevron (CVX) shares as oil prices surged, after first buying CVX stock near the end of 2020. Stocks at large closed out a volatile Q3 lower, though Apple and Occidental ended a bit higher.

BRKB Stock, Warren Buffett Stock Holdings

Class-B shares of Berksire Hathaway rose 1.3% to 287.46 in Friday’s stock market trading. BRKB has been consolidating since March.

On Oct. 4, BRKB stock gapped up following news that Buffett’s named successor Greg Abel had bought shares worth $68 million, up sharply from a prior stake below $3 million.

Apple stock shed 0.4% Friday, down sharply for the week. Occidental stock advanced 1.5%. CVX gained 1.3%. Several top energy stocks can be found on the IBD Leaderboard and the IBD 50 list of top growth stocks as the oil patch outperforms in the current market.

Berkshire Hathaway Buybacks

Berkshire bought back $1.05 billion of its stock in Q3, vs. roughly $1 billion in share repurchases in Q2. That slowed the pace from Q1, when the conglomerate bought back $3.2 billion of its own stock.

Berkshire held roughly $109 billion in cash as of Sept. 30. At the end of Q2, the cash balance stood at $105.4 billion. Until recently, the cash contribution to Berkshire earnings has been lackluster. But Edward Jones analyst James Shanahan says that rising rates are helping Berkshire’s cash balance to again earn a decent return.

Shanahan expects both higher interest rates and higher investment activity, including the Oct. 19 acquisition of insurer Alleghany, to fuel Berkshire earnings. He also forecasts more Berkshire share repurchases, which can help to drive earnings growth.

“BRK shares are now trading at approximately 1.25 times our estimate of book value as of year-end 2022, below the five-year average of almost 1.4 times,” the analyst wrote in an Oct. 19 note.

In July 2018, Berkshire loosened its policy on stock buybacks, which was tied to book value per share, or assets minus liabilities. That came after Buffett faced pressure to deploy more cash.

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