Over the past weekend, Berkshire Hathaway (BRK-B) posted third-quarter results. Profits increased by 34%, while cash increased to $381.7 billion. The firm did not buy back any shares in the quarter.
Berkshire CEO Warren Buffett will step down at the end of the year. Greg Abel will succeed him.
In Q3, Berkshire reported a 33.6% Y/Y increase in operating earnings, to $13.49 billion.
Cash levels increase. This contributed to the stock underperforming the S&P 500 (SPY) this year. Stock markets are discounting the “Buffett premium.” As a result, the company needs to prove that Greg Abel will manage the firm successfully.
In Q3, significant catastrophe events led to losses. It also had accruals associated with a bankruptcy settlement from Q3/2024.
The railroad system, BNSF, reported a car/unit volume growth of 0.8%. Freight volume of consumer products increased.
Berkshire acquired Occidental Petroleum’s (OXY) chemical business, paying $9.7 billion.
Cash Levels
Growth investors should not dismiss Berkshire after it increased its cash holdings. The company is in no rush to overpay for expensive companies. While the S&P 500 soared from euphoria in the AI age, Berkshire will look for traditional brick-and-mortar companies that generate strong cash flow.
Your Takeaway
Berkshire shares are in a yearlong downtrend. The stock is a hold, despite nearly 40% of its market capitalization representing its cash on hand. Investors may also consider Chubb (CB), Prudential (PRU), and Allstate (ALL) if they want exposure in the insurance business. By comparison, Berkshire owns Geico.
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