Warren Buffett's Berkshire Hathaway Inc has been hard hit by the coronavirus pandemic. On Saturday, it recorded a record net loss of nearly $ 50 billion a quarter, saying that performance is affecting several large operating companies.
Berkshire said that most of its more than 90 companies are "fairly mild to severely" exposed to the negative effects of COVID-19, the disease caused by the novel coronavirus and now punishing the global economy, with revenues self-supporting in April Companies that are considered "essential" slow down significantly. "
On the BNSF railroad, shipping volumes for consumer goods and coal declined, while Geico provided money for car insurance premiums that are no longer expected. Some companies have cut salaries and fired workers, and retailers like See & # 39; s Candies and the Nebraska Furniture Mart have closed.
Buffett allowed Berkshire's $ 128 billion cash share in late 2019 to a record $ 137.3 billion.
This reflected the 89-year-old billionaire's inability to make large "elephant-sized" acquisitions for its conglomerate based in Omaha, Nebraska, and caution when buying stocks.
Berkshire announced that it only bought $ 1.8 billion of stock in the first quarter. It also said it had bought back $ 1.7 billion of its own shares, but that was less than in the previous quarter.
"Historically, Buffett was so visible in times of crisis and encouraged investors to benefit from market sales. But if he sees no opportunities in his own stock, what should we think?" said Jim Shanahan, an analyst at Edward Jones & Co in St. Louis.
Still, Shanahan said Berkshire was "as well positioned as possible", reflecting its diverse business and substantial liquidity and access to capital. He rated Berkshire "buy".
Berkshire released the results ahead of its annual meeting at which Buffett said Berkshire sold its "entire positions" on the four largest US airlines in April: American, Delta, Southwest and United.
Buffett said Berkshire "made a mistake" by investing about $ 7-8 billion in the sector, which had been "very much" changed since the pandemic stopped most air travel through no fault of the airlines.
The meeting was streamed on Yahoo Finance. It took place without the usual "Woodstock for Capitalists", a festival weekend that usually draws tens of thousands of people to Omaha and has canceled the Buffett because of the pandemic.
BERKSHIRE STOCK SUPPORTS
Berkshire's net loss for the first quarter was $ 49.75 billion, or $ 30,653 per Class A share, a loss of $ 54.52 billion from shares and other investments. Net income a year earlier was $ 21.66 billion, or $ 13,209 per share.
According to one accounting principle, Berkshire must report unrealized equity losses and gains with net results, which leads to enormous fluctuations that Buffett believes are meaningless.
Quarterly operating income, which Buffett sees as a better metric, rose 6% to $ 5.87 billion, or about $ 3,624 per Class A share, from $ 5.56 billion, or about $ 3,388 per share.
However, last year's results reflected a fee for investments related to the public prosecutor's system, Ponzi, of a solar company that Berkshire knew nothing about.
Operating income in the Berkshire businesses declined 3%, with the BNSF, utilities and energy units, as well as the manufacturing, service and retail stores such as Precision Castparts that Berkshire bought in 2016 for $ 32.1 billion, declining.
Geico saw a 28% increase in underwriting profit before tax as people drove less, resulting in fewer accidents. Nevertheless, the insurer, like others, offers policyholders premium relief.
Vice Chairman Charlie Munger told the Wall Street Journal last month that Berkshire may be closing some small businesses.
Investors were disappointed with Berkshire. The share price fell 19% in 2020 compared to a 12% decline in Standard & Poor’s 500, although Buffett predicted Berkshire would outperform the lower markets.
The decrease was due to the fact that Berkshire's shares, including dividends, were more than 20 percentage points behind the index in 2019.
In the first quarter, many equity investments in Berkshire underperformed the S&P, including American Express, Bank of America, Wells Fargo and the four airlines.
Falling stocks also caused a $ 1.39 billion pre-tax loss on derivative contracts where Berkshire is betting that stock prices will rise in the long run.