Warren Buffett's Berkshire Hathaway is headed for a loss, stung by a battered market

Warren Buffett

Berkshire Hathaway Inc.

BRK.B 1.28%

turned to a loss in the third quarter as a volatile stock market and underwriting losses offset gains in its manufacturing, service and retail businesses.

The Omaha, Neb., company reported a net loss of $2.69 billion, or $1,832 per Class A equivalent, compared with a profit of $10.34 billion, or $6,882 per share, earlier.

Operating earnings, which exclude some investment results, rose to $7.76 billion from $6.47 billion last year. Mr. Buffett, Berkshire’s chief executive and chairman, said he prefers investors to look at the company’s operating earnings because large investments in Berkshire stock can cause net income or loss to fluctuate significantly from quarter to quarter, even if its core businesses are doing well.

Although some of Berkshire’s biggest stocks rose in the third quarter, the value of its overall portfolio fell along with the broader market— leading to his net loss.

“The size of investment gains/losses in a given quarter is usually meaningless” and can be “extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said in a statement accompanying the results.

Berkshire owns a variety of businesses spanning industries across America, including insurance company Geico, freight rail operator BNSF Railway, retailers such as Fruit of the Loom and homebuilder Clayton Homes. This makes its earnings of particular interest to investors looking for information on the health of the american economy.


What does Berkshire’s earnings report tell you about the state of the market? Join the conversation below.

Like many companies, Berkshire was hit by a spike in inflation in the third quarter as well as extended supply chain disruptions.

BNSF, for example, was able to charge customers more per loaded railcar, but was squeezed by higher fuel costs and lower overall freight volumes, which cut its after-tax earnings by 6.2% in the third quarter.

“We continue to experience the negative effects of higher costs for materials, freight, labor and other inputs,” Berkshire said.

Berkshire’s insurance business also took a $2.7 billion hit after Hurricane Ian.

But Berkshire’s utilities and energy unit outperformed, thanks to gains in its pipeline business and power distribution company Northern Powergrid. Higher energy prices have helped boost profits for oil, gas and utility companies this year.

The tight housing market also helped boost results at Berkshire’s homebuilding businesses, which include paint company Benjamin Moore, flooring company Shaw Industries and brick and mortar company Acme Building Brands. With mortgage rates rising while the Federal Reserve tries to controlling inflation by raising interest ratesand home prices begin to fall, Berkshire said demand for its housing-related businesses and services is likely to decline from current levels.

Overall, Berkshire’s manufacturing, service and trading businesses reported a 20% rise in earnings in the third quarter.

Meanwhile, Berkshire continued to use cash for stock investments and buybacks. The company spent $1.05 billion on share buybacks in the third quarter, in line with the total three months earlier but well below the pace of buybacks in 2021. Berkshire, which has largely bought back its own his shares in 2021, this year he turned to investing in other companies – buying millions more shares of

Chevron corp.

and getting up

Occidental Petroleum of Corp

single largest shareholder.

Energy stocks have been by far the best performers on the stock market this year, while Berkshire’s interest in Occidental has shot the stock to the top of the S&P 500. It has more than doubled since 2022.

Berkshire still had a big pile of cash at the end of the quarter. The company reported having cash and cash equivalents of $109 billion at the end of September, up slightly from $105.4 billion in the second quarter.

Write to Akane Otani at [email protected]

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