(AP Photo/Nati Harnik)

Warren Buffett’s Berkshire Hathaway reports a $44 Billion loss as the value of investments fall

Berkshire Hathaway, run by billionaire Warren Buffett, reported a loss of $43.8 billion in the second quarter of 2022. Despite this, Berkshire earned an operating profit of $9.283 billion.

That was achieved by offsetting new losses at the Geico car insurer, where parts shortages and rising used car prices increased accident claims, with gains from reinsurance and the BNSF railroad.

Berkshire said on Saturday that a largely unrealized $53 billion decrease in the value of its investments caused it to post a loss of $43.8 billion.

A Reuters report quoted James Shanahan, an Edward Jones & Co analyst, as saying that despite the net loss, “the results show Berkshire’s resilience” Shanahan also rated Berkshire as “neutral.”

A CNBC report stated that in the second quarter, stocks fell into a bear market as the Federal Reserve aggressively raised interest rates to combat skyrocketing inflation and ease concerns of a recession.

Buffet has been gradually increasing his holdings in Occidental Petroleum since March, giving Berkshire a 19.4% share in the company, currently valued at $10.9 billion.

The S&P 500’s best-performing stock this year has been Occidental, whose price has more than doubled due to increasing oil prices.

(AP Photo/Nati Harnik)

Why this is a big deal

Due to Buffett’s reputation and the fact that the performance of the conglomerate’s several operating divisions frequently tracks broader economic trends, investors pay close attention to Berkshire.

Berkshire said Saturday that a largely unrealized $53 billion decline in the value of its investments forced it to report a loss of nearly $44 billion, or $29,754 per Class A share. That is down from $28.1 billion, or $18,488 per Class A share, a year ago.

Buffett has said he believes Berkshire’s operating earnings are a better measure of the company’s performance because they exclude investment gains and losses, which can vary widely from quarter to quarter.

By that measure, Berkshire’s earnings were up significantly to $9.28 billion, or $6,312.49 per Class A share from last year’s $6.69 billion, or $4,399.92 per Class A share.

Analysts covering Berkshire expected the company to report operating earnings per Class A share of $4,741.64.

As the Federal Reserve announces a rate change, traders work and watch at the New York Stock Exchange in New York, Wednesday, July 27, 2022. Stocks on Wall Street are solidly higher in afternoon trading Wednesday after the Federal Reserve raised its key interest rate by widely expected three-quarters of a point as the central bank ratchets up its campaign to quell surging inflation. (AP Photo/Seth Wenig)

The Federal Reserve

According to CNBC, in the second quarter, stocks fell into a bear market as the Federal Reserve aggressively raised interest rates to combat skyrocketing inflation and ease concerns of a recession. Since March, Buffet has been slowly increasing his holdings in Occidental Petroleum, giving Berkshire a 19.4% share in the company, currently valued at $10.9 billion.

The S&P 500’s best-performing stock this year has been Occidental, which has seen its price more than double due to rising oil prices.

Berkshire said its revenue grew more than 10% to $76.2 billion in the quarter as many of its businesses increased prices.

Berkshire’s many companies still performed well, suggesting the overall economy is weathering the pressure from inflation and rising interest rates.

President Joe Biden speaks about the “Inflation Reduction Act of 2022” in the State Dining Room of the White House in Washington, Thursday, July 28, 2022. (AP Photo/Susan Walsh)

Portfolios are Suffering

It was a rough quarter for Berkshire’s biggest investmentsApple, American Express, and Bank of America.

They all fell significantly during the 2nd quarter, but rebounded during the 3rd quarter, boosting the value of Berkshire’s portfolio at the end of the quarter.

Ticker Security Last Change Change %
AAPL APPLE INC. 165.35 -0.23 -0.14%
AXP AMERICAN EXPRESS CO. 157.51 +0.64 +0.41%
BAC BANK OF AMERICA CORP. 33.96 +0.56 +1.68%

Berkshire Hathaway owns more than 90 companies.

The conglomerate reported that operating profits were up, including its insurance companies, major utilities, and BNSF railroad.

Berkshire reported a $487 million pre-tax underwriting loss at Geico, which reported bigger auto claims losses because of the soaring value of vehicles and ongoing shortages of car parts.

Berkshire said it was sitting on $105.4 billion in cash at the end of the quarter, which was little changed from the $106 billion it reported at the end of the first quarter.

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ABOUT THE WRITER:

Elena Patestas is a journalist and writer for Valuetainment media. She attended Pepperdine University in Malibu, California, and Adelphi University on Long Island, New York. She was born and raised in Roslyn, New York, and currently lives in Miami, Florida.

Elena is passionate about bringing positive change to our world and believes education is the root to solving many societal problems. After overcoming a chronic health condition, Elena became passionate about health and believes food is the key to preventing dis-ease and achieving optimum health.

Amongst her many goals, she hopes to bring positive, impactful change to our world to create a healthy, financially sound, and unified society.

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