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Warren Buffett’s Berkshire Hathaway Inc is being hit by the coronavirus pandemic, posting a record quarterly net loss of nearly $ 50 billion on Saturday and saying performance is suffering in several major operating businesses.
Berkshire said that the majority of its more than 90 businesses have faced “relatively mild to severe” negative effects of Covid-19, the disease caused by the new coronavirus, with a considerable decrease in revenue in April even in considered businesses ” essential. “
The BNSF railroad saw shipping volumes drop, Geico set aside money for auto insurance premiums he doesn’t expect to collect, and some companies cut wages and laid off workers. Retailers like See’s Candies and Nebraska Furniture Mart closed stores.
Buffett also allowed Berkshire’s cash stake to rise to a record $ 137.3 billion from $ 128 billion at the end of 2019.
That reflected the inability of the 89-year-old billionaire to make big acquisitions, the size of an “elephant”, now in its fifth year, and the caution of buying more shares. Berkshire repurchased $ 1.7 billion of its own shares.
Berkshire’s first-quarter net loss totaled $ 49.75 billion, or $ 30,653 per Class A share, reflecting $ 54.52 billion of investment losses, primarily common stock. A year earlier, net earnings totaled $ 21.66 billion, or $ 13,209 per share.
An accounting rule requires Berkshire to report profit and loss on unrealized stock with profit. This causes major changes in Berkshire’s net results that Buffett considers to be pointless.
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Quarterly operating profit, which Buffett considers a better performance measure, increased 6% to $ 5.87 billion, or about $ 3,624 per Class A share, from $ 5.56 billion, or about $ 3,388 per share .
The results from the previous year reflected a charge on investments linked to what prosecutors called fraud in a solar company. Operating profit in Berkshire’s business units fell 3%, with lower earnings for BNSF, utilities and energy, and manufacturing, services and retail businesses.
Vice President Charlie Munger told the Wall Street Journal last month that some small Berkshire businesses could close entirely.
The profits come before the presentation of the Berkshire annual meeting. Buffett and Berkshire Vice President Greg Abel will address shareholders on Saturday afternoon.
Berkshire Stocks are underperforming
Investors have been disappointed with Berkshire, whose share price was below the Standard & Poor’s 500 by more than 20 percentage points in 2019, including dividends.
While Buffett has said Berkshire’s shares would outperform the markets, he has not done so this year. As of Friday, its shares fell 19% in 2020, compared to a 12% drop in the S&P 500.
The United States’ gross domestic product fell at an annualized rate of 4.8% in the first quarter, the Commerce Department said this week in its advance estimate of economic growth.
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Many economists expect a large double-digit drop in GDP in the second quarter. Unemployment claims nationwide since March 21 totaled about 30.3 million, or 18% of the workforce, a level not seen since the Great Depression.
The S&P 500 fell 20% in the first quarter, but many of Berkshire’s equity investments fared worse, including American Express, Bank of America, Wells Fargo, and four airlines: American, Delta, Southwest, and United.
Berkshire was not a large net buyer of shares in the quarter, bought $ 4 billion and sold $ 2.2 billion.
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