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Berkshire Hathaway 1st Quarter 2011 May 31, 2011

Posted by shaferfinancial in Finance, Uncategorized.
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Before I get into the analysis I want to make it clear that this blog is for amusement only and I have no license to sell securities. This is only an accounting of my investing and the stocks I personally own. Do not take anything I say on this blog as investing advice or a solicitation to purchase or sell securities.

Berkshire’s 1st quarter net income dropped from $3.6B to $1.5 B. Revenue increased 5% over the year before. This is almost solely the result of additional reserves put into the property and casualty insurance business to cover losses from natural disasters [Japan, Australia, New Zealand, etc.] as well as actual payouts for those insurance claims. Buffett has had 7 years of underwriting profit and it is unlikely to get his eighth! There was some additional accounting losses that were required on the equity side even though Buffett has no intention of selling these securities [when it would be a real loss instead of an accounting loss].

BNSF performed very well in the quarter as well as the auto insurance business GEICO [up 6.4%]. Most of the subsidiaries also showed improvement over the year before. For example Marmon net income increased 17%. Shareholder equity increased $2.7B to $160.1B.

There is a major acquisition that should close in the 3rd quarter of 2011 of Lubrizol for $9B.

Bottom line for Berkshire is continued revenue increase, continued shareholder equity increase, and another major acquisition. Some insurance underwriting losses are expected for the year. This is typical in the property and casualty insurance business.

The price of the stock has been beaten down some of late and currently sits at $117,900 for the A’s. I believe this represents a buying opportunity. Berkshire stills throws off much cash every quarter and continues to drive up stockholder value.

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