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Berkshire bought $51 billion stock as Buffett combats supply chain; operating results flat

Stock Markets Apr 30, 2022 10:31AM ET
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2/2 © Reuters. FILE PHOTO: Warren Buffett, CEO of Berkshire Hathaway Inc, pauses while playing bridge as part of the company annual meeting weekend in Omaha, Nebraska U.S. May 6, 2018. REUTERS/Rick Wilking/File Photo 2/2

By Jonathan Stempel

OMAHA, Neb. (Reuters) - Warren Buffett's Berkshire Hathaway (NYSE:BRKa) Inc dove into equity markets in the first quarter, spending more than $51 billion on stocks including a much larger stake in Chevron Corp. (NYSE:CVX)

Berkshire, which Buffett has run since 1965, also said on Saturday quarterly operating profit was little changed from a year earlier, with some businesses able to fend off supply chain disruptions. Geico, the car insurer, posted an underwriting loss.

The Omaha, Nebraska-based company also said it repurchased $3.2 billion of its own stock in the quarter, but none in the first three weeks of April.

Berkshire's disclosures suggest that Buffett has finally found large new uses to dispose of Berkshire's cash pile, which shrank more than $40 billion to about $106 billion.

The Chevron stake grew to $25.9 billion as of March 31 from just $4.5 billion three months earlier, as oil prices surged higher following Russia's invasion of Ukraine.

That came on the heels of Berkshire's purchase of well over $6 billion of stock in Occidental Petroleum Corp (NYSE:OXY), where it already had a $10 billion preferred stock stake.

Buffett has also committed $11.6 billion to buy insurance company Alleghany (NYSE:Y) Corp, and bought $4.2 billion of HP Inc (NYSE:HPQ) stock.

Berkshire ended March with $391 billion of stocks, more than half of the company's $712 billion overall market value.

Other businesses include the BNSF railroad, Berkshire Hathaway Energy, and a variety of manufacturing and retail operations including See's Candies and Dairy Queen ice cream.

NET RESULTS FALL

First-quarter operating profit edged up to $7.04 billion, or about $4,786 per Class A share, from $7.02 billion a year earlier.

Berkshire's net income fell 53% to $5.46 billion, or $3,702 per Class A share, to $11.71 billion, or $7,638 per Class A share, a year earlier.

Net results included $1.58 billion of gains and losses from stocks including Apple Inc (NASDAQ:AAPL), as well as Chevron.

An accounting rule requires Berkshire to report unrealized gains and losses with net results, and Buffett urges investors to ignore the resulting volatility.

Berkshire released results ahead of its first in-person annual shareholder meeting since 2019 in Omaha.

DISRUPTIONS

In its quarterly report, Berkshire alluded to the Ukraine invasion, without mentioning it specifically, and the spread of Omicron variants of COVID-19 in discussing the supply chain issues that many businesses now face.

"Significant disruptions of supply chains and higher costs have persisted in 2022," it said. "Further, the development of geopolitical conflicts in 2022 have contributed to disruptions of supply chains, resulting in cost increases for commodities, goods, and services in many parts of the world."

Berkshire businesses that took hits included Precision Castparts aircraft parts, Clayton Homes mobile homes and McLane food distribution.

Chip shortages were also a problem, dampening consumer shipping volume at BNSF and reducing sales volume at Berkshire Hathaway Automotive car dealerships.

Revenue nevertheless rose at both, with BNSF benefiting from higher fuel prices and surcharges, and car and truck sales revenue growing because vehicles are getting more expensive.

Rising used car prices and shortages of replacement parts also weighed on the Geico auto insurer, which posted an underwriting loss because loss claims are increasing.

Profit from Berkshire Hathaway Energy, one of Berkshire's largest businesses and a steady earnings generator, rose 7%, helped by higher electric utility margins and tax benefits at its MidAmerican Energy unit.

Berkshire's stock has withstood recent market volatility far better than many other large U.S. stocks. Its Class A shares are up more than 7% this year, while the Standard & Poor's 500 has fallen 13%.

Berkshire bought $51 billion stock as Buffett combats supply chain; operating results flat
 

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Comments (7)
Bipin Kochar
Bipin Kochar May 01, 2022 4:10AM ET
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Buffet has clearly his savviness rightly picking hi potential value stocks like Occidental - as this sector has seen minimal investments in last decade and prices will remain high even if Russia sanctions are removed
James Franigan
James Franigan Apr 30, 2022 4:28PM ET
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These guys are loosing their touch. Buying high and selling low
Yin LeGrand
Yin LeGrand Apr 30, 2022 11:34AM ET
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buying on top of the market (buying oil companies at middle of war) and selling at bottom (selling airlines and banks at heart of pandemic) is the new game in town.
Oswaldo Martinez
Oswaldo Martinez Apr 30, 2022 11:34AM ET
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How right you are man. But theres always something under the table.
Millennial Stacker
Millennial Stacker Apr 30, 2022 11:24AM ET
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Share buybacks should be illegal
Jerome Sheehan
JayShee Apr 30, 2022 11:24AM ET
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Why? When an entity cannot find value opportunities where the return is sufficient, buying back shares often adds much more value than just sitting on cash.
We Fi
We Fi Apr 30, 2022 11:04AM ET
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He bought or robbed I bet for second
FMGK Blue
FMGK Blue Apr 30, 2022 10:47AM ET
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Never bet against America Inc.
Quinton King
Quinton King Apr 30, 2022 10:18AM ET
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“Ignore the resulting volatility”. Yikes he must be expecting some rough results this quarter
 
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