BRK.B: How Did Berkshire Hathaway Perform in Q3 of 2023?

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) announced on Saturday a significant increase in its operating earnings for the third quarter, and it also reported a historically high cash position, as Warren Buffett found limited opportunities for acquisitions.

The conglomerate, based in Omaha, saw its operating earnings — which reflect the profits from its extensive portfolio of fully-owned businesses, including insurance, railways, and utilities — reach $10.761 billion in the last quarter. This is an increase of 40.6% over the $7.651 billion reported in the same period the previous year.

Berkshire's cash reserves had surged to a new high of $157.2 billion at the end of Q3, exceeding the previous record of $149.2 billion set in the third quarter of the previous year.

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The investment savant from Omaha has been capitalizing on the rise in bond yields by purchasing short-term Treasury bills with yields of at least 5%. By the close of the third quarter, the conglomerate's holdings in such investments had ballooned to $126.4 billion, a considerable leap from roughly $93 billion at the end of the previous year.

Meanwhile, Berkshire Hathaway's share buyback program has decelerated even as its shares soared to unprecedented heights during the quarter. The company has spent $1.1 billion on share repurchases in Q3, totaling around $7 billion over the first nine months.

Berkshire’s Class A shares have witnessed a nearly 14% surge this year. Although they hit a record high on September 19, the shares have seen a subsequent drop of about 6% from its peak.

Geico, a standout performer in Berkshire's insurance portfolio and a favorite of Buffett notched another quarter of profit, boasting underwriting earnings of $1.1 billion. The auto insurer is in the process of revitalization after ceding some ground to its rival, Progressive.

BNSF Railway, on the other hand, faced a 15% drop in profits as it battled against reduced freight volumes and escalating expenses.

On the investment front, Berkshire Hathaway reported a considerable loss of $24.1 billion for the third quarter, a dip largely attributed to the decreased value of its substantial Apple (NASDAQ: AAPL) investment. Apple's stock fell by 11.7% during that period, although it has since climbed by over 3%.

Berkshire Hathaway counseled its investors to disregard the short-term volatility of its stock portfolio's value.

"The investment gains or losses recorded in any single quarter are typically inconsequential, leading to net earnings per share that could be highly deceptive for investors who are not well-versed in accounting principles," the firm advised in its statement.

Despite a notable rise in operational earnings, the conglomerate did not shy away from mentioning the ongoing economic distress caused by the pandemic, along with the challenges posed by geopolitical tensions, supply chain disruptions, and inflation.

"Our various businesses have been affected, to different extents, by the efforts of both governments and the private sector to counteract the negative economic impacts of the COVID-19 virus and its variants, as well as by the emergence of geopolitical conflicts, supply chain interruptions, and governmental measures to curb inflation," Berkshire remarked. "It's not currently possible to accurately forecast the long-term economic outcomes resulting from these issues."

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