Uncommon Financial Wisdom

Berkshire Hathaway Continues to Chug Along Producing Cash November 9, 2011

Headlines for Berkshire Hathaway after announcing its 3rd Quarter Results were predictably irrelevant to understanding how Berkshire is doing. Because the general market dropped in the 3rd quarter, Berkshire’s derivatives and equity portfolio did too. This variation masks the underlying reality that there was improving profits throughout the entire company.
Book Value dropped 1.7%, but is up over 6% year on year.
Operating results is what really shined. Operating earnings were $3.8B up 27.5% over last year’s 3rd quarter and up 41% over last quarter. BNSF revenue was up 13% with a 8% increase in profits over last year. Earnings at the utilities and energy companies were up 12.4%. Manufacturing, Service and Retailing were up a whopping 30%.
Insurance underwriting made over $1B profit last quarter a reversal of the $6B loss the quarter before. But, underwriting profit/loss varies greatly quarter to quarter so we don’t get worried about that number given their history of making a profit on underwriting more often than not. Pressure for upward movement in insurance premiums exists which probably means a larger float at the end of the year.
Cash on hand is still over $30B.
And this last quarter was the biggest buying spree of equities in the last 8 years for Berkshire. We have to wait a little longer to find out what was bought.
Berkshire remains heavily undervalued by the market by all accounts.