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Berkshire Hathaway's Earnings Fall as Unrealized Investment Gains Decline—2nd Update

By Nicole Friedman 

Berkshire Hathaway Inc.'s cash pile hit a record in the third quarter, as Warren Buffett continued his hunt for large companies to buy at attractive prices.

Berkshire held $128 billion in cash or short-term Treasurys as of Sept. 30, the company said Saturday, up from $122 billion at the end of the second quarter.

Berkshire bought back about $700 million of its own shares in the third quarter, bringing its total buybacks for the year to $2.8 billion, the company said. The Omaha, Neb., conglomerate changed its buyback policy last year, and some shareholders are frustrated the company hasn't spent significantly more cash repurchasing its stock.

Berkshire reported third-quarter net earnings of $16.5 billion, or $10,119 per Class A share equivalent, from $18.5 billion, or $11,280 a share, in the year-earlier period. Last year's third-quarter earnings surged due to unrealized investment gains.

Operating earnings, which exclude some investment results, rose to $7.9 billion from $6.9 billion in the year prior.

The conglomerate runs a large insurance operation as well as railroad, utilities, industrial manufacturers and retailers. Its holdings include recognizable names like Dairy Queen, Duracell, Fruit of the Loom, Geico and See's Candies.

Berkshire's insurance business sits at the core of its moneymaking machine. Insurance brings in billions of dollars of "float," upfront premiums customers pay and that Berkshire invests for its own gain. Berkshire also holds large stock investments, including in Apple Inc. and Wells Fargo & Co. As of Sept. 30, Berkshire held nearly $100 billion in financial-services stocks, underscoring the size of its bet on the future of the U.S. economy.

Class A shares closed Friday at $323,400, up 5.7% for the year. In contrast, the S&P 500 is up 22% this year.

The 89-year-old Mr. Buffett, whose shrewd investments have earned him the nickname "the Oracle of Omaha," has complained in recent years about the challenge of finding acquisition targets that are large enough to move the needle for Berkshire and are reasonably priced.

"Prices are sky-high for businesses possessing decent long-term prospects," he wrote in his 2018 letter to shareholders.

One of Mr. Buffett's key lieutenants in recent years, Tracy Britt Cool, said in September that she would leave Berkshire in 2020 to start her own investment vehicle.

Write to Nicole Friedman at nicole.friedman@wsj.com

 

(END) Dow Jones Newswires

November 02, 2019 09:22 ET (13:22 GMT)

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