Berkshire Hathaway ((BRK.A)), run by billionaire Warren Buffet, suffered a loss during the first quarter as the economy weakened due to the ongoing global pandemic, supply chain bottlenecks and high inflation rates.
The company reported on Saturday net earnings at $5.46 billion, which plummeted by 53% from $11.71 billion compared to last year.
Thousands of investors and fans of the Oracle of Omaha and vice chairman Charlie Munger are in Omaha, Nebraska for the company's annual shareholder meeting. Buffett and Munger answer questions from shareholders each year while other investors can watch the livestream.
The conglomerate owns a myriad of companies from smaller stakes to outright holdings ranging from railroads, insurance, utilities to tech companies such as Apple ((AAPL))and its infamous holdings such as Coca-Cola ((KO)), Kraft Heinz ((KHC)) and See's Candies. Berkshire's operating earnings remained flat at $7.04 billion due to a large decline from its insurance underwriting business. The insurance companies reported a loss of almost 94% to $47 million from $764 million compared to last year.
"The headline looks like Berkshire's earnings were cut in half. but in a pandemic supply chain economy, it shows the operating companies of Berkshire have an incredibly stable earnings base and are able to earn through thick and thin," Robert Johnson, a finance professor at Creighton University, told TheStreet. "As a Berkshire shareholder, that is what I am most interested in."
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Buffett said investors should focus on the operating earnings of its companies versus the stakes it owns in public companies.
The marketable securities portfolio of Berkshire is much smaller than it was 30-40 years ago, Johnson said.
"In some sense since the operating companies are such a bigger portion of the company, it should be the focus," he said. "Given the slowing of the economy in the first quarter, I think it is a great earnings report. I'm betting more on the ability of them to acquire operating companies. There isn't much volatility in the earnings of the operating companies."
The conglomerate spent about $41 billion of net purchases during the first quarter, adding to its Chevron ((CVX)) stake that vaulted the investment into Berkshire’s top four common stock holdings.
Buffett said on Saturday during the shareholder meeting that there were "no great surprises" about its earnings during the shareholder meeting.
He said the company did not know what the impact of the pandemic would yield.
"We feel good about how things have turned out," Buffett said. "We have an extreme aversion to incurring any permanent loss with your funds.
The behemoth saw its cash levels decline to $106 billion from $147 billion at the beginning of the year due to its investment in equities and as it invested $51 billion in equities and spent $3.2 billion repurchasing Berkshire stock. Berkshire Hathaway also lost $1.58 billion due to the broader market decline.
"We will always have a lot of cash on hand," he said.
The company bought Alleghany, for $11.6 billion in March, the largest purchase since 2016. Berskhire's stake in Occidental Petroleum ((OXY)) is now worth $7 billion and its HP stake is valued at $4.5 billion.
Berkshire's Class A shares increased by over 7%, beating the benchmark S&P 500 which has sunk by 13.3 % in 2022.
