Berkshire Hathaway's net profit triples while stock portfolio bests S&P 500
Filed under: Berkshire Hathaway
Warren Buffett, one of the world's richest men and CEO of conglomerate Berkshire Hathaway (BRK.A), once proclaimed that "the banking business is no favorite of ours." The comment came in one of his famous missives to Berkshire's shareholders by way of explaining that financial companies were too risky and opaque for the über-investor's tastes. But that was in 1990. Today, well-timed investments in banks like Goldman Sachs (GS) and Wells Fargo (WFC) are looking like smart moves for Buffett and Berkshire Hathaway, according to figures contained in the company's quarterly earnings statement released Friday. So are bets on a number of other blue-chip stocks like Johnson & Johnson (JNJ) and Coca-Cola (KO). The company's third-quarter net income nearly tripled to $3.24 billion, or $2,087 per Class A equivalent share, compared with $1.06 billion, or $682 per Class A equivalent share, in the year-ago quarter.
Profits on derivatives linked to rising stock markets in the U.S. and abroad, as well as the falling cost to insure debt investments against default, boosted overall profits, even though Buffett has downplayed the role of such earnings (or losses, as was the case last year) in his company's results. Operating profit, which strips out investment gains, at Berkshire subsidiaries fell 0.67 percent to $2.06 billion, or $1,325 per Class A share in the quarter Berkshire said in a statement (PDF).
From GEICO and Fruit of the Loom to Nebraska Furniture Mart and the Acme Brick Company, Berkshire Hathaway owns a plethora of companies large and small.
But beyond Berkshire's operating results and broad financial market bets, the company's quarterly earnings statement contains a trove of information on how Buffett's bets on individual companies' stocks are performing. And it probably won't surprise die-hard fans of the so-called "Oracle of Omaha" that his equity portfolio outperformed the S&P 500 through the first nine months of the year.
Indeed, Buffett's stocks -- which also include American Express (AXP) and Kraft Foods (KFT) among others -- advanced 17 percent through Oct. 30, according to documents filed with the Securities and Exchange Commission (PDF). That's compared with a 14.7 percent gain in the S&P 500 over the same period.
And that doesn't even include Buffett's high-profile investment in Goldman Sachs, which has been looking smarter and smarter as the investment firm, and its competitors, return to profitability.
Berkshire holds the right to buy 43.4 million shares of Goldman stock before 2013 for $115 a piece, about two-thirds of Friday's closing price of $171.78. Exercising the options and selling the stock today would result in a $2.5 billion profit for Berkshire.
With returns like that, it's a good bet the banking industry has risen somewhat in Buffett's esteem.
D-Day for Harry Reid: Can he wrangle 60 votes for Senate health reform bill?
Fed stalls on Chinese bank deal, costs taxpayers $1.7 billion
Dell in a handbasket: Should founder Michael Dell resign?
Reader Comments (Page 1 of 2)
11-06-2009 @ 9:50PM
Jan said...
Too bad he didn't run for President!!!
Reply
11-06-2009 @ 11:57PM
psmail2 said...
How come he gets away with trading on inside information?
11-07-2009 @ 9:31AM
NS said...
He would not have won. It takes a different set of skills to win elections
11-06-2009 @ 10:19PM
shell said...
wells fargo and goldman not all banks the wrighter of this artical is a bit misleading ,ya think i guess he wants some outragousness in his life look at me look at me
Reply
11-06-2009 @ 10:32PM
kluji said...
He isnt as good as he is made out to be. Just Wait and watch all these earnings evaporate soon and then they will say, oh but he has lost less than the s&p
Reply
11-07-2009 @ 5:39PM
Kent said...
I bought B shares about 6 years ago, when they were around $2000 a share. Now they are over $3200 a share.
If you look at my IRA since 2007, when the collapse of high-risk mortgages started killing private equity deals and caused credit to tighten, the only thing that is up is BRK.B.
Buffet buys companies that are well run and either need capital to expand or simply are priced too low to pass up. Case in point is BNSF. It was $115 a year ago. It closed around $76 the day before the Berkshire purchase was announced.
11-07-2009 @ 12:15AM
Bob said...
Buffett makes money the old fashioned way, he earned it. How can he support Obama? Buffet must have been drunk or under the influence of something.
Reply
11-07-2009 @ 5:09AM
Mike Young said...
Mr Buffett pays no income tax, ever.
He does not realise profit or income. Just keeps it on the books.
We must tax wealth, as England does-how do you think we get all these billionaires?
The xews have all our money and our grandkids lives-we have sold our soul to the meyers/rothschilds.
There is no gold in Ft Knox.
Mike
Reply
11-07-2009 @ 8:13AM
Marcia Wucher said...
Didn't we have a revolution so that wouldn't have to have England's laws. Main cause was taxes.
11-07-2009 @ 6:59AM
greg said...
Mike Young, you are hilarious....ignorant people always
are good for a laugh.....
Reply
11-07-2009 @ 7:02AM
NOENERGYFUTURES said...
YEA BUT GOLDMAN SACHS WAS NOT A "BANK" BEFORE THE MELTDOWN...THEY DECIDED THEY NEEDED TO BE A "BANK" AT THE LAST MINUTE SO THEY COULD TAKE BILLIONS IN TARP MONEY...REMEMBER HENRY PAULSON??????
Reply
11-07-2009 @ 8:24AM
Joe said...
Goldman Sachs was shorting the market while selling what it called AAA bonds (credit default swaps. Clear case of fraud. Warren is in bed with GS. Not good.
http://www.goldmansachs666.com/2009/04/does-goldman-sachs-run-world.html
Reply
11-07-2009 @ 2:25PM
Jake said...
TOO many BILLIONAIRS and CORPORATIONS in USA side stepping their USA tax obligations thus increasingthe burden for the Middle Class taxpayers. BH operators like every investment company, profitting from inside information NOT avaialble to the public.
Reply
11-07-2009 @ 9:39PM
tom e.e said...
Not true!! about a year ago Buffet did a piece on BNSF railroad and how it was in a position to benefit from all the world trade comming to the US. .I saw it any one who is looking can see what he sees .He is good and so is his style. Wake up Jake
11-07-2009 @ 11:31AM
mex said...
don;t be envious of mr buffet i happen to follow his ideas and theories buy when people are fearful and get out of the market. buy low sell high. i have done good sticking with him, and i realy don't need a stockbroker.who better to handel you'r money than you. do you'r homwork before you invest in any co. keep a track record monthly, yearly don't take sombody's word for it. enough said remember you reap what you sow. don't be critical of mr buffet he is just a smart man with money.
Reply
11-07-2009 @ 11:45AM
dpc2224 said...
God bless Warren. He's rich but humble. He really does what he can to help America and investors who struggle to understand the complexity of the financial markets. He's a great person with values that should be emulated by youth.
Reply
11-07-2009 @ 2:38PM
drtjyen said...
these earnings are meaningless ! unless you started investing after the meltdown. Anyone who owned stock before the meltdown is still in the hole until the DJIA goes back above 13,000.
Reply
11-07-2009 @ 2:25PM
bill james said...
warraen buffets an old man whos greedy and doesnt relize when he kicks the buckets his stupid money's worth less . People like this old geeezer are the reason americans are doing terribly they hoard ALLLLLLL the money even their stinkcing foundations dont help anyone unless yr multi millaionaire companies the middle class and lower class people dont get anything from these devila but advice whooopeee dooo i can go to mom for that i have no faith in wealthy people as their idiots greedy too selfish and terrible rolse models for anyone
Reply
11-07-2009 @ 2:54PM
C said...
Bill James you sound like a complete moron. It is statements like yours that will separate the winners and losers in our society. The billionaires are obviously doing something you are not capable of
11-07-2009 @ 2:44PM
Gene R. Peckover said...
Warren Buffet laid me off from one of his housing companies. I have helped him by making his numbers look better. Now maybe he can help me by granting me seed money to start my business that I have been working on for 3 years. I can add 6mpg & 10mpg with an extra 150hp to V8 gas Ford, Chevy & Chrysler vehicles with factory warranty continuance. Large Family Highway Hybrids with Towing capability. GenesVettes.com. Reduce gas consumption from 30% to 50%.I have 3 test vehicles that I give test drives by appointment.2007 Corvette 34mpg hwy-43mpg around town 750hp-2008 Corvette 32mpg hwy 40 around town 775hp-2009 Silverado 28mpg hwy-32 around town -18mpg towing 6,000 lbs -500hp-550tq. Who will tell the public about a solution that works & will save 30 to 50 % gas consumptiom . That will also support our auto industry so we can have safer vehicles made here in the US. Gene
Reply