Berkshire Hathaway Inc., owned by Warren Buffet, follows the age-old mantra of buying the dips.
According to results released Saturday, Berkshire reported net buying of equities for $ 3.8 billion in the latest quarter. Last year, the conglomerate was a net seller in the second quarter.
The Omaha, Nebraska-based Berkshire Hathaway stepped in to buy when S&P 500 dropped 16% in the last quarter. The company reported an operating profit of $9.2 billion amidst gains from its railroad and insurance business.
CFRA Research analyst Cathy Seifert said the auto insurance unit Geico is giving signs of potential warnings. The unit reported an underwriting loss of $487 million, even as Berkshire’s other insurance verticals gained.
However, Seifert said that the comprehensive report reflected a decent growth in the top line. There is still decent demand for goods and services, which has been offset by higher raw material costs and stock market volatility.
Tough Spot
Berkshire said Geico suffered losses as a result of high claims due shortage of auto parts and higher prices of used cars. The company said that though it raised the premiums, the active policies declined—the business hints at the unit losing its market share as customers hunted elsewhere for better rates.
Seifert says that Geico is in a tough spot as of now. The same trends are being played out at other auto insurers as well.
The same weakness in the market allowed Buffet to increase his buying powers, as seen in its results. The company reported investment portfolio lost $53 billion resulting in a net loss of $43.8 billion. Due to accounting rules, Berkshire played down the results by saying they provided a misleading picture of the company’s actual position.
According to Bloomberg Intelligence, Berkshire were net buyers in the second quarter of $3.8 billion and $ 45.2 billion in 2022. This is compared to a $16 billion net seller the previous year. The trend may continue and does not signal bearishness on the part of Buffet on his shares. Buybacks by Buffet have had low priority historically and repurchases in the second quarter of $1 billion were a decline from an average of $7 billion a quarter in 2021.
Buffet piled on other shares, and his appetite for buybacks declined. Stocks buyback declined from $3.2 billion at the beginning of 2022 to $ 1 billion in the second quarter, and investments come from insurance clocked at $1.91 billion.
In June, Berkshire Hathaway Energy acquired common stocks worth $ 870 million from Greg Abel, its vice chairman. The company has not disclosed this transaction earlier.
The cash pile was hardly dented despite the spending spree by Berkshire. The company spent $ 105.4 billion at the end of June, hardly budging from its $106 billion in the first quarter.
Berkshire aggressive buying of Occidental Petroleum shares raised speculation about the company’s intent to acquire the energy giant. However, the company did not disclose any strategy insights in its regulatory filing.
