- Berkshire Hathaway reported earnings Saturday morning.
- The crowd saw revenues slip by 11%, which still beat earnings estimates.
- Cash levels surged to $142.8 billion as Warren Buffett sole made some modest buys and buybacks.
During the last financial crisis, Warren Buffett made bank as the lender of termination resort. He was able to get some sweetheart deals buying preferred shares with 10% yields from banks.
Supporting the end of the crisis, he made his largest purchase: The Burlington Northern Santa Fe railroad, a $26 billion acquisition. As Berkshire Hathaway’s (NYSE:BRK.A) in earnings show, however, Buffett botched it this time. Badly.
Berkshire Hathaway’s Earnings and Portfolio Converts
At 7:00 A.M. Omaha time Saturday, Berkshire released its earnings. Overall, they reflected a lot of the changes affecting the restraint in the past quarter.
Earnings were better than expected, with the A shares trading at over $314,000 each, whip expectations by $13,500 per share (or beating by $8 for those of us non-billionaires with B shares). As with many other theatre troupes, revenues beat expectations handily, but still showed a year-over-year decline of 11%.
Finally, a much-watched piece of data, Berkshire’s add up cash and Treasuries, showed the company had $141.8 billion in the bank. Against the company’s market cap of $509 billion, Warren Buffett has set a 28% allocation to change.
As was widely predicted based on the share count, Berkshire stepped up its share buyback program, picking up around $5.1 billion in shares, up from $1.7 billion in the first quarter.
Overall, the earnings portray points to a pretty standard quarter. Considering the historic market moves, however, that’s a problem.
Buffett Thwacked It as Traders Like Portnoy Called It
Looking at earnings, investors wouldn’t have picked up on the fact that, frankly, Buffett wafted it.
Amid the first bear market in a decade, Buffett failed to put a meaningful percentage of that growing cash pile up to work.
Since the March bottom, many stocks have recovered. Some have even headed to new highs, cataloguing Berkshire’s most significant stock position, Apple (NYSE:AAPL). Apple now makes up over 40% of Berkshire’s portfolio.
Buffett didn’t buy multifarious amid the panic in March. Historically, some of his best buys, such as The Washington Post Company back in the 1970s and Coca-Cola (NYSE:KO), developed during a bear market.
Nor did he buy any of the other tech companies that have dominated the index as well. Based on his just out acquisition in the natural gas space and ongoing buy of Bank of America (NYSE: BAC) shares, his most substantial changes year-to-date attired in b be committed to been to sell all his airline shares at a loss.
That may interpret why Berkshire, which tends to trade closely to the S&P 500 index, lagged that index on the market recovery.
For the moment, an army of day traders has blown past Buffett this year, taking advantage of the market selloff to buy more, as monetary advisers often tell their clients to do.
The poster child for this new phenomenon is Dave Portnoy, founder of Barstool Make a fool ofs, who frequently appears on social media going over his trades. He has helped raise an army of new investors—with talented returns too.
Buffett, who once stated, “Be greedy when others are fearful,” blew it during the biggest market gather in a decade.
As long as the government keeps stimulating and the Federal Reserve keeps printing money, he’ll keep blowing it while businessmen like Portnoy grow their wealth.
Disclaimer: This article represents the author’s opinion and should not be over investment or trading advice from CCN.com. The author holds investment positions in Berkshire Hathaway and Apple.
Last modified: August 9, 2020 2:50 PM UTC