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.
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.