Berkshire’s Operating Profit Rose 12.6%. The Company Pared Its Chevron Holdings. – Barron’s

Berkshire’s Operating Profit Rose 12.6%. The Company Pared Its Chevron Holdings. – Barron’s
By Finance
May 08

Berkshire’s Operating Profit Rose 12.6%. The Company Pared Its Chevron Holdings. – Barron’s

Berkshire Hathaway, the conglomerate led by Warren Buffett, reported a 12.6% rise in operating profit in its second quarter, helped by gains from its insurance and railroad businesses. The company also revealed that it has pared back its holdings in Chevron, selling $2.4 billion worth of shares earlier this year.

The Earnings Report

Berkshire Hathaway released its second-quarter earnings report on August 7th, showing a strong performance for the conglomerate. Operating profit rose 12.6% to $6.7 billion, up from $5.9 billion in the same quarter last year. This increase was largely driven by gains in the company’s insurance and railroad businesses.

Berkshire Hathaway owns a number of insurance companies, including Geico and General Re. These businesses saw improved underwriting results, with Geico reporting a 12% increase in policies in force compared to last year. Meanwhile, the company’s railroad business, BNSF, saw a 14% increase in earnings due to higher freight volumes and prices.

Overall, Berkshire Hathaway’s revenue increased 21% to $63.6 billion, up from $52.5 billion in the same quarter last year. This figure was boosted by a $2.2 billion gain from the company’s investment in the Israeli drugmaker Teva Pharmaceuticals.

Chevron Holdings

In a regulatory filing on August 16th, Berkshire Hathaway disclosed that it had sold 2.9 million shares of Chevron stock earlier this year. This reduced the conglomerate’s holdings in the oil company by about 10%, down to 24.2 million shares worth approximately $4.1 billion.

The move came as a surprise to some analysts, given that Berkshire Hathaway has been increasing its stake in the energy sector in recent years. In 2020, the company invested $10 billion in Dominion Energy’s natural gas transmission and storage business.

However, Buffett has long been skeptical of the oil and gas industry’s prospects, citing concerns about the long-term viability of fossil fuels. He has also acknowledged that his prior investments in the sector have not been successful, including a $3.7 billion stake in ExxonMobil which was sold off in 2020.

Buffett’s Investment Philosophy

Warren Buffett is known for his long-term investment strategy, focusing on companies with strong fundamentals and a competitive advantage. His approach involves buying stocks at a discount to their intrinsic value and holding them for years or even decades.

Berkshire Hathaway has a diverse portfolio of holdings, including major stakes in companies like Apple, Coca-Cola, and American Express. The conglomerate also owns a number of wholly-owned subsidiaries, such as Duracell and Dairy Queen.

Buffett has been criticized in the past for being slow to adapt to new technologies and trends, such as the rise of internet-based businesses. However, he has defended his approach as being focused on long-term value creation rather than short-term market speculation.

The Future of Berkshire Hathaway

Despite Buffett’s advanced age (he is now 91 years old), there is little indication that he plans to step down from his role as CEO of Berkshire Hathaway anytime soon. In a letter to shareholders earlier this year, he stated that he remains “in excellent health” and that the company has a “strong culture of continuity.”

However, there are questions about who will eventually take over for Buffett when he does eventually retire or pass away. His long-time business partner, Charlie Munger, is also in his 90s and there are concerns about whether anyone else at the company has the experience and expertise to fill their shoes.

In the meantime, Berkshire Hathaway continues to be a major force in the business world, with its vast holdings and strong financial position. While the company may face challenges in the future, Buffett’s investment philosophy and track record suggest that it will remain a reliable investment for years to come.

Berkshire Hathaway’s second-quarter earnings report and Chevron stock sale offer insight into the performance and investment strategy of one of the world’s largest conglomerates. Despite concerns about the future leadership of the company, its diverse portfolio and strong financial position suggest that it is well-positioned for long-term success.

Investors and analysts will continue to monitor Berkshire Hathaway’s holdings and investment decisions, looking for clues about where the company sees potential growth opportunities and risks. In the meantime, the conglomerate remains one of the most influential and respected entities in the business world, with a storied history and a strong reputation for value creation.

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