Berkshire Hathaway’s Third Quarter Operating Earnings Rise 6.6%

In a Form 10-Q filing released after the market closed today, Berkshire Hathaway reported an increase in third quarter operating earnings of 6.6%, as results improved in its manufacturing and energy businesses, but declined in its insurance and railroad operations.  Net earnings, which include investments and derivatives, declined by 23.7%.  Warren Buffett has stated that since one time capital gains or losses from investments, and valuations of derivatives, vary greatly from quarter to quarter, one should focus instead on operating earnings.

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At the end of the third quarter, Berkshire had a cash position of $85 billion, far in excess Warren Buffett’s goal of $20 billion.   Berkshire also reported a book value per A share of $163,783.  At today’s closing price of 214,545, Berkshire is selling at a price to book value ratio of 1.3.  Warren Buffett has set a target of buying back shares of Berkshire at a price to book value ratio below 1.2.

 

Berkshire Hathaway decentralization

Chart via Larry Cunningham

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About the Author

Dr. David Kass
David I Kass Clinical Associate Professor, Department of Finance Ph.D., Harvard University Robert H. Smith School of Business 4412 Van Munching Hall University of Maryland College Park, MD 20742-1815 Phone: 301-405-9683 Email: dkass@rhsmith.umd.edu (link sends e-mail) Dr. David Kass has published articles in corporate finance, industrial organization, and health economics. He currently teaches Advanced Financial Management and Business Finance, and is the Faculty Champion for the Accelerated Finance Fellows. Prior to joining the faculty of the Smith School in 2004, he held senior positions with the Federal Government (Federal Trade Commission, General Accounting Office, Department of Defense, and the Bureau of Economic Analysis). Dr. Kass has recently appeared on Bloomberg TV, CNBC, PBS Nightly Business Report, Maryland Public Television, Business News Network TV (Canada), Fox TV, American Public Media's Marketplace Radio, and WYPR Radio (Baltimore), and has been quoted on numerous occasions by Bloomberg News and The Wall Street Journal, where he has primarily discussed Warren Buffett and Berkshire Hathaway. He has also launched a Smith School “Warren Buffett” blog. Dr. Kass has accompanied MBA students on trips to Omaha for private meetings with Warren Buffett, and Finance Fellows to Berkshire Hathaway’s annual meetings. He is an officer of the Harvard Business School Club of Washington, DC, and is a member of the investment and budget committees of a local nonprofit organization. Dr. Kass received a Smith School “Top 15% Teaching Award” for the 2009-2010 academic year.