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Unrealized Investment Gains Lift Berkshire's Q3 Results

We do not anticipate making any major changes to our share fair value estimate.

With wide-moat-rated Berkshire Hathaway's BRK.A third-quarter (and year-to-date) results not varying too widely from our expectations, we do not anticipate making any major changes to our $355,000 ($237) per Class A (B) share fair value estimate in place. That said, our assumptions related to the impact that the COVID-19 pandemic and subsequent recession are likely to have on Berkshire's different operating subsidiaries could change as we completely digest the company's most recent results.

Third-quarter (year-to-date) revenue, which includes unrealized and realized gains/losses from Berkshire's investments and derivatives portfolios, increased 24.6% (declined 20.8%) year over year to $94.6 billion ($182.5 billion). Excluding the impact of investment and derivative gains/losses and other adjustments, third-quarter (year-to-date) operating revenue declined 2.6% (4.1%) to $63.0 billion ($180.9 billion).

Operating earnings, exclusive of the impact of investment and derivative gains/losses but including goodwill and intangible asset impairments (including $9.8 billion attributable to Berkshire's 2016 acquisition of Precision Castparts), decreased 32.1% (14.5%) year over year to $5.5 billion ($16.9 billion) during the September quarter (first nine months of 2020). When including the impact of the investment and derivative gains/losses, net earnings increased 82.4% (fell 87.2%) to $30.1 billion (negative $6.7 billion).

Berkshire closed out September with $138.9 billion in cash (after excluding $6.8 billion payable for U.S. Treasuries at the end of the quarter), down from a record $146.6 billion at the end of June, with Berkshire (by our estimates) having around $113 billion in dry powder that could be committed to investments, acquisitions, and share repurchases in the fourth quarter of 2020 (with the company already laying out $2.7 billion for Dominion GT&S in early November). The firm repurchased $9.3 billion worth of its common stock during the third quarter.

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