Berkshire Hathaway Profit Falls: Buffett Hints At New Purchase

Berkshire Hathaway Profit Falls: Buffett Hints At New Purchase
By Mark Hirschey (Work of Mark Hirschey) [CC BY-SA 2.0], via Wikimedia Commons

Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) posted their earnings report today, which included major losses due to derivatives. These losses totaled a 9% drop from last year, yet Buffett remains highly optimistic.

Warren Buffet’s company generally backs away from derivatives, but he does have one very large on in the portfolio. Even though he has repeatedly stated that this position will be profitable over time, it generated nearly $700 million in losses in the last quarter.

Berkshire Hathaway Profit Falls: Buffett Hints At New Purchase

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The report states that Berkshire Hathaway Inc. (NYSE:BRK.A) (BRK.B) earned $3.11 billion compared to the $3.42 billion earned last year in the same quarter. This translates to $1,882 per class A share, and $2,072 per class A share in the respective quarters. The value of the class A shares stands at $107,377, and the companies ongoing buyback is capped at 110% of the book value.

Berkshires cash on hand has risen by $3 billion since the first of this year, and now stands at a whopping $40.66 billion.

The company has been looking to make large acquisitions of late, and Warren Buffett hinted that a deal larger than $30 billion is in the near future. One of Berkshires shareholders has said that derivatives are meaningless in the future, as Berkshire is planning on building up a major cash pile, for the purpose of an acquisition deal. As of now, Berkshire’s largest acquisition was a $26.5 billion deal with Burlington Northern Santa Fe, which he completed in 2010.

Warren Buffett is the CEO of Berkshire, and oversees more than 70 operating units, which sell products in nearly every major industry. He has announced that when he does relinquish control of the company, his role will be split between other capable people. He told investors in a letter last February that he has suggested his son Howard as a non-executive-chairman. Howard has been a company director since 1993, and is more than able to operate in this capacity. He also said that the board has chosen its next CEO and his two backups.

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