It seems nobody is immune to the recent downturn in US stock prices. Not even legendary investor Warren Buffett, nor his famed conglomerate Berkshire Hathaway, which just posted a staggering second-quarter loss of US$43.8 billion (AU$63.2 billion). That’s equal to a net loss of US$29,754 (AU$42,946) per Class A share.
Despite this, a good portion of Berkshire Hathaway’s 90+ operating companies managed to stay the course, generating close to US$9.3 billion (AU$13.4 billion) in profits through avenues such as reinsurance and the BNSF railroad.
Additionally, while three of Berkshire Hathaway’s biggest investments – Apple (NASDAQ: AAPL), American Express (NYSE: AXP), Bank of America (NYSE: BAC) – all experienced significant hits to their stock prices exceeding 21% during Q2, they’ve since recovered during the current reporting period. As a result, the Berkshire portfolio’s total value has actually been boosted above where it sat towards the end of June.
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“Mr Buffett has long said he believes Berkshire Hathaway’s operating earnings are a better measure of the company’s performance because they exclude investment gains and losses, which can vary widely quarter to quarter,” writes Josh Frunk of the Australian Financial Review.
“The strong results at most of Berkshire Hathaway companies offset a US$487 million (AU$702 million) pre-tax underwriting loss at insurance company GEICO, which reported bigger vehicle claims losses because of the soaring value of cars and ongoing shortages of car parts.”
“All auto insurers have been dealing with inflation in claims costs,” said CFRA Research analyst Cathy Seifert.
“GEICO has been less successful than some at passing through rate increases and retaining customers.”
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“Berkshire is a microcosm of the broader economy. Many businesses are enjoying improved demand, but they are not immune to higher input costs from inflation.”
Berkshire Hathaway also revealed its revenue swelled by over 10% to US$76.2 billion (AU$109.9 billion) as businesses increased prices. Cash reserves, on the other hand, are now sitting at US$105.4 billion (AU$151.9 billion), which barely changed from the US$106 billion (AU$153 billion) disclosed at the conclusion of Q1.
Check out some of the worst-performing stock positions held by Berkshire Hathaway based on recent loss below (via Forbes).
Berkshire Hathaway’s Worst-Performing Stocks*
**Calculated from most recent peak to current price.
Liberty Latin America (NASDAQ: LILA) -66%
The expert explanation: “This Bermuda-based communications company operates in Chile, Puerto Rico and different locations around Latin America. Bundled services are offered to homes and businesses with video, broadband internet, and mobile phone available. Liberty Latin America has been trading below that downtrend line since mid-2019. A long time, even in Omaha.”
RH (NYSE: RH) -64%
The expert explanation: “This specialty retail firm is headquartered in Corte Madera, California. In a news release dated 6/29/2011, CEO Gary Friedman put it this way: ‘The deteriorating macro-economic environment has resulted in lower than expected demand since our prior forecast, and we are updating our outlook, particularly for the second half of the year.'”
“‘Taking into account the macro-economic conditions and our current business trends, we are providing the following outlook for the second quarter and full year, which assumes demand will continue to soften during the remainder of fiscal 2022: Fiscal 2022 net revenue growth in the range of (2%) to (5%) with adjusted operating margin in the range of 21.0% to 22.0%.’”
NU Holdings (NYSE: NU) -62%
The expert explanation: “At least it could be said that Nu Holdings has broken above the weekly downtrend line and appears to show the very beginnings of a bounce. The Brazilian digital bank perhaps IPO’ed at just the wrong time as interest rates began to rise significantly, making it a tough go for an interest rate-sensitive equity.”
Snowflake (NYSE: SNOW) -59%
The expert explanation: “Snowflake is a software application company that calls itself a ‘globally distributed enterprise with more than 3,000 employees working in 20 countries.’ The company’s earnings per share this year are off by 20.90% and there is no ‘past five years’ EPS record yet as it hasn’t been around that long. One thing that very likely appeals to Berkshire Hathaway: Snowflake has no debt, long-term or otherwise. Now, if the stock price would just stop going down.”
(“This list leaves out Paramount Global’s -75% from its most recent weekly peak price to its current price because it’s an extreme kind of outlier.” – John Navin, Forbes)
