Berkshire's Businesses, Portfolio in Solid Shape

While wide-moat-rated Berkshire Hathaway's (BRK.A) (BRK.B) reported fourth-quarter (full-year) results were in line with our expectations, we expect to raise our $480,000 ($320) per Class A (B) share fair value estimate slightly to account for the positioning of the company's businesses and investment portfolio coming into 2022.

Fourth-quarter (full-year) revenue, which includes both realized and unrealized gains/losses from Berkshire's investments and derivatives portfolios, declined 27.0% (increased 23.9%) to $75.8 ($354.6) billion from $103.7 ($286.3) billion in the prior year's period(s), on a marked decrease (increase) in investment gains year over year. Excluding the impact of investment and derivative gains/losses and other adjustments, fourth-quarter (full-year) operating revenue increased 11.5% (12.5%) to $71.8 ($276.1) billion. Operating earnings, exclusive of the impact of investment and derivative gains/losses, increased 45.1% (25.2%) year over year to $7.3 ($27.5) billion during the December quarter (full year) of 2021. When including the impact of the investment and derivative gains/losses, operating earnings increased 10.6% (111.2%) to $39.6 ($89.8) billion from $35.8 ($42.5) billion in the prior year's period(s).

Book value per share (by our estimates) increased 8.3% sequentially to $342,622 (from $316,443 at the end of September), above our forecast of $332,265 (which did not include as much of a contribution from the investment portfolio as occurred during the December quarter). The company closed out the fourth quarter with $146.7 billion in cash and cash equivalents, up from $138.3 billion at the end of last year, despite buying back $27.0 billion worth of Berkshire's stock during 2021. By our calculations, Berkshire came into the first quarter of 2022 with around $112 billion in excess cash on hand that could be committed to investments, acquisitions, and share repurchases.