Warren Buffett’s Berkshire Hathaway dramatically slowed its pace of new investments in the second quarter after its blistering pace at the start of the year, as a sell-off in the US stock market pushed the insurance-to-railroad conglomerate to a $43.8bn loss in the three months to June.
Berkshire claimed that the global financial market drop had adversely affected its stock portfolio, which declined to $391bn from the end March. Its stock portfolio fell to $328bn as a result. The $53bn loss booked was far more than the positive quarter for its businesses which led to an increase in their profitability.
The company’s filing with US securities regulators showed its purchases of new stocks dwindled to about $6.2bn in the quarter, down from the $51.1bn it spent between January and March — a spurt that surprised Berkshire shareholders. In the most recent three-month period, Berkshire had sold $2.3bn in stocks.
Berkshire also spent $1bn to buy back its own shares in June. This tactic is commonly used when Buffett and his investment group can find less appealing targets in a market.
The 91-year-old investor signalled at the company’s annual meeting in Omaha in April that the spree of multibillion-dollar stock purchases was likely to slow as the year progressed, saying that the atmosphere in the company’s headquarters had become more “lethargic”.
Investors will get a more detailed update on how Berkshire’s stock portfolio has changed later this month, when the company and other big money managers disclose their investments to regulators. Separate filings reveal that the company has increased its stake at Occidental Petroleum in recent weeks.
The investments in the quarter meant Berkshire’s mammoth cash and Treasury holdings were little changed from the end of March, falling less than $1bn to $105.4bn.
While net income slid from a $5.5bn profit at the year’s start to a $43.8bn loss, operating income — which excludes the ups and downs of Berkshire’s stock positions — rose 39 per cent to $9.3bn.
Berkshire is required to include the swings in the value of its stock and derivatives portfolio as part of its earnings each quarter, an accounting rule that Buffett has warned can make the company’s earnings figures look “extremely misleading”.
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