Berkshire Hathaway's operating earnings jumped 20% in the third quarter while the bear market took a toll on equity investments. Warren Buffett's Berkshire Hathaway kept share repurchases relatively modest, though it was a net buyer of stocks, including Occidental Petroleum, during that period.
Revenue and earnings for Buffett's Berkshire derive from diverse operating companies as well as its equity investments.
In a volatile Q3, the conglomerate's stock purchases exceeded stock sales by $3.7 billion, the Berkshire earnings release Saturday showed. The tally included $2 billion invested in Occidental shares.
Investors are likely to learn more details of Berkshire's Q3 stock buys and sells on Nov. 14, when quarterly 13F filings are due.
During Q3, Berkshire bought back $1.05 billion of its own stock, taking Berkshire stock buybacks for the first three quarters of 2022 to $5.25 billion. That was "considerably lower" than $20 billion in share repurchases during the first nine months of 2021, Edward Jones analyst James Shanahan wrote in a note to clients Saturday.
Amid muted stock buybacks and rising interest rates, Berkshire's cash balance reached $109 billion at the end of September, up from $105.4 billion at the end of June.
Berkshire Earnings From Operating Businesses
For Q3, operating earnings — Buffett's preferred measure for assessing performance — rose 20% vs. a year earlier to $7.761 billion.
In terms of operating EPS, Berkshire earned $4.90 in Q3 as revenue increased 5%, FactSet shows. Analysts on Wall Street had expected Berkshire operating earnings of $2.81 per share, down 2.3% vs. a year ago.
In Q3, Berkshire lost $962 million from insurance underwriting, after Hurricane Ian slammed Florida in late September. Berkshire-owned auto insurer Geico reported an underwriting loss. But Berkshire's insurance investment income rose 21% to $1.41 billion, aided in part by strong premium growth.
Rail earnings slid 6% vs. a year earlier. Utilities and energy earning rose 6% vs. a year ago.
Overall, Berkshire Hathaway lost a net $2.69 billion last quarter, including a $10.45 billion loss on equity investments amid the ongoing bear market. For Q2, Berkshire had posted a $53 billion loss on investments.
Berkshire's stock portfolio includes a monster stake in iPhone maker Apple besides a large and growing one in OXY stock.
The conglomerate kept grabbing more Occidental shares over Q3, taking its stake in the oil and gas producer to nearly 21% at the end of September. That came after Buffett's Berkshire bought nearly 6 million OXY shares in Q1 as well as nearly 121 million more Chevron shares as oil prices surged, after first buying CVX stock near the end of 2020. Stocks at large closed out a volatile Q3 lower, though Apple and Occidental ended a bit higher.
BRKB Stock, Warren Buffett Stock Holdings
Class-B shares of Berkshire Hathaway rose nearly 1% to 290.19 amid a broad rally in Monday's stock market. BRKB has been consolidating since March.
On Oct. 4, BRKB stock gapped up following news that Buffett's named successor Greg Abel had bought shares worth $68 million, up sharply from a prior stake below $3 million.
Apple stock rose 0.4% on Monday, after plunging 11% last week. Occidental stock advanced 3.7%. CVX gained 1.2%. Several top energy stocks can be found on the IBD Leaderboard and the IBD 50 list of top growth stocks as the oil patch outperforms in the current market.
Berkshire Hathaway Stock Buybacks
Some investors may have been disappointed by the muted pace of Berkshire stock buybacks last quarter. Ahead of Q3 earnings results, Edwards Jones analyst Shanahan had predicted higher share repurchases, which can fuel earnings growth.
However, Shanahan says that rising rates are helping Berkshire's cash balance to again earn a competitive return. Until recently, the cash contribution to Berkshire earnings has been lackluster. But Treasury bills, Buffett's favored place to park cash, are now yielding 4%, up from next to nothing at the start of 2022.
In July 2018, Berkshire loosened its policy on stock buybacks, which was tied to book value per share, or assets minus liabilities. That came after Buffett faced shareholder pressure to deploy more cash.
Looking forward, Shanahan also expects higher investment activity to fuel Berkshire earnings.
Berkhire completed its $11.6 billion acquisition of insurer Alleghany on Oct. 19. Shanahan expects Warren Buffett to invest $4 billion for a majority stake in Pilot Travel Centers in early 2023.
Buffett's Berkshire already has a 38.6% interest in the Pilot Flying J brand owner, a leading supplier of fuel to truckers, as gas-station operators benefit from fat fuel margins.
