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NEW YORK: Warren Buffett’s Berkshire Hathaway Inc is being hit hard 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 face “relatively mild to severe” negative effects of COVID-19, the disease caused by the new coronavirus, and which is now punishing the global economy, with revenues slowing considerably in April, even in businesses considered “essential” “.
The BNSF railroad saw consumer and coal shipping volumes drop, while Geico set aside money for auto insurance premiums it no longer expects to collect. Some companies cut wages and laid off workers, and 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 89-year-old billionaire’s inability to make large “elephant” -type acquisitions for his Omaha, Nebraska-based conglomerate and caution in buying shares.
Berkshire said it bought just $ 1.8 billion net of stock in the first quarter. He also said he repurchased $ 1.7 billion of his own stock, but that was less than in the previous quarter.
“Historically, Buffett has been so visible in times of crisis and encouraged investors to take advantage of massive market sales, but if he doesn’t see opportunities even in his own shares, what do we think?” said Jim Shanahan, an analyst at Edward Jones & Co in St. Louis.
Still, Shanahan said Berkshire is “as well positioned as it can be,” reflecting its diverse businesses and considerable liquidity and access to capital. Rate Berkshire as “buy”.
Berkshire released the results ahead of its annual meeting, where Buffett said Berkshire sold its “full positions” on the four largest US airlines in April: American, Delta, Southwest and United.
Buffett said Berkshire “made a mistake” by investing approximately $ 7 billion to $ 8 billion in the sector, which changed “in a very important way” as the pandemic shut down most air travel, through no fault of airlines.
The meeting was broadcast on Yahoo Finance. It was held without the usual “Woodstock for Capitalists,” a holiday weekend that normally draws tens of thousands of people to Omaha, and which Buffett canceled due to the pandemic.
BERKSHIRE STOCK SUBPORTES
Berkshire’s first-quarter net loss was $ 49.75 billion, or $ 30,653 per Class A share, reflecting $ 54.52 billion in losses on shares and other investments. Net earnings were $ 21.66 billion, or $ 13,209 per share, a year earlier.
An accounting rule requires Berkshire to report gains and losses on unrealized stock with net results, causing major changes that Buffett considers meaningless.
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 .
But the results from the previous year reflected an investment charge tied to what prosecutors called a Ponzi scheme at a solar company, which Berkshire was unaware of.
Operating profit in Berkshire’s business fell 3%, with declines in BNSF, utilities and energy units, and manufacturing, service and retail operations such as Precision Castparts, which Berkshire bought for $ 32.1 billion in 2016.
Geico was able to post a 28% gain in pre-tax subscription earnings because people drove less, resulting in fewer accident claims. Still, the insurer, like others, is offering premium relief to policyholders.
Vice President Charlie Munger told The Wall Street Journal last month that Berkshire could close some small businesses.
Investors have been disappointed with Berkshire. Its share price has fallen 19% in 2020, compared to a 12% drop in the Standard & Poor’s 500, despite Buffett’s prediction that Berkshire would outperform in the downside markets.
The decline came after Berkshire stocks lagged more than 20 percentage points on the index in 2019, including dividends.
In the first quarter, many Berkshire equity investments fared worse than S&P, including American Express, Bank of America, Wells Fargo and all four airlines.
The drop in shares also caused a pre-tax loss of $ 1.39 billion in derivative contracts, where Berkshire is betting that stock prices will rise in the long term.
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