- Warren Buffett's Berkshire Hathaway reported second-quarter earnings on Saturday.
- Berkshire slowed its stock purchases and buybacks, but posted higher revenue and operating profits.
- Berkshire paid nearly $900 million to a top executive for his 1% stake in Berkshire Hathaway Energy.
Warren Buffett's Berkshire Hathaway was a net buyer of stocks, cut back on share repurchases, and overcame troubling inflation to post broad-based growth across most of its businesses in the second quarter of this year.
The famed investor's company also handed close to $900 million to Greg Abel, the head of Berkshire's non-insurance operations and Buffett's nominated successor as CEO, in exchange for his estimated 1% stake in Berkshire Hathaway Energy.
Here are 4 key takeaways from Berkshire's second quarter:
1. Berkshire keeps buying
Buffett and his team spent a net $3.8 billion on stocks last quarter, buying $6.2 billion worth and selling $2.3 billion worth. They likely capitalized on the S&P 500's roughly 20% tumble between the start of April and mid-June; a Markets Insider analysis of SEC filings shows Berkshire spent about $1.3 billion on Occidental Petroleum stock last quarter.
Berkshire significantly reined in its stock buying, after deploying an astounding $51 billion in the first quarter. Still, Berkshire was a net seller of stocks in both 2020 and 2021, suggesting Buffett and his colleagues were relatively bullish last quarter.
2. Reining in repurchases
Berkshire spent about $1 billion on stock buybacks in the second quarter, or less than a third of the $3.2 billion it deployed in the first quarter.
Notably, it didn't repurchase any shares in April or May, when Berkshire's stock price ranged from about $300 to $350. It may have found better uses for its money, or determined Berkshire shares were no longer materially undervalued at those levels.
Berkshire shares slumped below $270 in mid-June, and traded well under $300 for most of the month, which may explain why Buffett and his team resumed their repurchases.
3. A windfall for Buffett's successor
Berkshire paid Abel, the former boss of MidAmerican Energy, $870 million for his roughly 1% stake in BHE in June. The deal lifted Berkshire's stake in BHE to about 92.1%. The remaining shares are held by the estate of Walter Scott, the Buffett confidant and former Berkshire director who died in September.
Abel, who owned less than $3 million of Berkshire stock as of March 2, might use some of his payment to purchase Berkshire stock, signaling his belief in the company before he eventually takes the CEO reins from Buffett.
4. Firing on most cylinders
Berkshire reported a 10% year-on-year increase in revenues to $76 billion, as sales rose across its insurance, railroad, energy, manufacturing, wholesale, service, and retailing businesses.
The Burlington Northern Sante Fe (BNSF) railway was the standout, growing revenue by 14% to $6.6 billion, while the manufacturing segment reported a 14% rise in sales to nearly $20 billion.
Buffett's conglomerate also reported a 16% rise in earnings from its operating businesses to $10 billion, fueled by a 56% rise in insurance profits, and a 12% increase in manufacturing income.
However, Geico swung from a $626 million profit in the second quarter to a $487 million loss last quarter, as higher used car prices and shortages of car parts drove up the cost of paying out claims.
The McLane wholesale business and Berkshire Hathaway Energy (BHE) also posted lower profits due to sharply higher costs.