Warren Buffett’s Berkshire Hathaway said on Saturday (6) that disruptions to the global supply chain have limited its ability to generate profit and that rising stock prices have led it to sell some shares and boost its cash earnings to a level. record.
Operating profit grew 18%, but was below experts’ forecasts. A resurgence of Covid-19 cases fueled by the Delta variant of the coronavirus has caused shortages of goods and decreased consumer spending. Hurricane Ida damage and flooding in Europe increased losses at auto insurer Geico and other insurance units.
Net income, meanwhile, was down 66%, reflecting smaller gains from holdings of stocks such as Apple and Bank of America Corp.
Berkshire repurchased $7.6 billion of its own shares in the third quarter, and $20.2 billion this year. Rising stock market prices have made buying entire companies more and more expensive.
The buybacks, which seemed to continue into October, suggest that 91-year-old billionaire Buffet sees more value in his own Omaha, Nebraska-based conglomerate, whose businesses include the BNSF railroad and the eponymous energy unit.
“One of the big games is knowing what the next big Berkshire acquisition is,” said Cathy Seifert, an analyst at CFRA Research, with a “wait” rating for Berkshire. “I think we just saw it: he bought back $20 billion of his own stock.”
Berkshire has also been selling shares and shed about $2 billion more in bonds than it bought in the quarter. It ended September with 149.2 billion in cash or equivalent.
“I hope there will be more buybacks because there’s not a lot of evidence that this capital is being put to work,” said Jim Shanahan, an analyst at Edward Jones & Co who rates Berkshire as a “buy.”
Third-quarter operating income rose to $6.47 billion, or about $4,331 per Class A share, from $5.48 billion, or about $3,488 per share, a year earlier.
Analysts generally project $4,493 per share, according to Refinitiv I/B/E/S.
Net income dropped to $10.3 billion, or $6,882 per Class A share, from $30.1 billion.
Buffett, who owns Forbes’ estimated fortune of $106.4 billion and is the 10th richest person in the world, believes that large quarterly swings in bottom line are usually insignificant and caused by accounting rules he doesn’t control.
Reference: CNN Brasil