Warren Buffett’s Berkshire Hathaway Inc’s cash hoard hit a record as first-quarter profit jumped 51 percent on gains from equity-linked derivatives and insurance operations.
Net income climbed to US$4.89 billion, or US$2,977 a share, from US$3.25 billion, or US$1,966, a year earlier, the Omaha, Nebraska-based company said on Friday in a statement.
The cash pile grew to US$49.1 billion from US$47 billion three months earlier, eclipsing the previous record of US$47.9 billion in the second quarter of 2011.
Photo: Reuters
Berkshire is benefiting as improvements in the housing market help the US economy rebound from the biggest slump since the Great Depression.
As chairman and chief executive officer for more than four decades, Buffett transformed his company through takeovers from a textile maker into a firm that hauls freight, generates electricity, sells insurance and manufactures building supplies from bricks to paint.
“This earnings report is the tip of the iceberg,” Bill Smead, portfolio manager of the Smead Value Fund, which owns Berkshire shares, said in an interview in Omaha. “Warren has organized the company around the rebirth of the United States economy over the next 10 years and this is the beginning of that rebirth.”
Operating profit, which excludes some investment results, was US$2,302 a share, beating the US$1,996 estimate of three analysts surveyed by Bloomberg.
Book value, a measure of assets minus liabilities, rose to US$120,525 a share from US$114,214 at the end of last year.
The equities portfolio was valued at US$97.2 billion on March 31, up from US$87.7 billion at the end of 2012 as American Express Co, Coca-Cola Co and DirecTV rallied.
Berkshire increased its stock bet in the category listed as “banks, insurance and finance” in the quarter, Buffett’s firm said in a regulatory filing, without identifying companies.
Berkshire spent US$1.41 billion on equities in the quarter after increasing the amount of funds overseen by deputy stock pickers Todd Combs and Ted Weschler, while selling US$673 million, according to the filing.
There were US$1.81 billion in purchases of fixed maturity securities and US$675 million in sales.
Derivatives helped results as the gain from equity index puts rose to US$1.25 billion in the three months ended March 31 from US$689 million a year earlier, after global stocks rallied.
US GDP climbed at a 2.5 percent annualized pace in the first quarter, driven by higher consumer spending and residential construction, data from the US Department of Commerce showed last week.
Underwriting profit at the insurance unit surged to US$901 million, from US$54 million a year earlier. Berkshire Hathaway Reinsurance Group added US$974 million before taxes, compared with a loss of US$191 million a year earlier. At auto insurer Geico, pretax profit more than doubled to US$266 million.
Investor Warren Buffett has said he believes that the economy and the US job market will continue to improve, but slowly.
In an interview that aired on Friday, Buffett said business has been creeping upward at his Berkshire Hathaway conglomerate.
“The economy is improving, not at a rapid clip, but this country has done well since 2008 — certainly compared to the rest of the world,” Buffett said.
Buffett thinks it would be extraordinary if the US Federal Reserve were to expand its bond-buying program beyond the current US$85 billion a month level.
The Fed said on Wednesday that it would consider buying more if the economy needs help.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure