Berkshire Cash Hoard Scores Another Record As Earnings Gain

(Bloomberg) -- Berkshire Hathaway Inc.’s cash pile hit yet another record as billionaire investor Warren Buffett confronted a dearth of big-ticket deals. Operating earnings also rose, buoyed by his collection of insurance businesses. 

The firm’s hoard increased to $189 billion at the end of the first quarter, topping the record it set at year-end. The company also reported first-quarter operating earnings of $11.2 billion, versus $8.07 billion for the same period a year earlier.

Buffett, 93, in February decried a lack of meaningful deals that he said would give the firm a shot at “eye-popping performance.” Even as the company ramped up acquisitions in recent years, including an $11.6 billion deal to buy Alleghany Corp. and its purchase of shares in Occidental Petroleum Corp., Berkshire has struggled to find sizable deals. That’s left Buffett with more cash — what he has called an unrivaled mountain of capital — than he and his investing deputies could quickly deploy.

As Berkshire’s annual meeting kicked off in Omaha on Saturday, Buffett said that “it’s a fair assumption” that its cash pile will hit $200 billion at end of this quarter. “We’d love to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money.”

The company will hope for an “occasional big opportunity,” he said.

In the absence of deals, Berkshire has turned to buying back its own shares. It spent about $2.6 billion doing that in the first quarter, it said in its earnings statement Saturday. 

Still, higher interest rates helped drive up interest and other investment income to $1.9 billion, from $1.1 billion in the first quarter of last year. 

“Berkshire continues to benefit from attractive yields on short-term investments and large cash balances,” said Jim Shanahan, an analyst at Edward Jones. “Rising rates are enabling Berkshire’s still considerable cash balance to once again earn a competitive return.”

The company reported a $135.4 billion stake in Apple Inc. in that period, down from $174.3 billion at the end of the year — though it remains its top holding. Apple has been hit by a drumbeat of negative news, including a $2 billion antitrust fine, slumping sales in China and the scrapping of a decade-long car project. Berkshire had already pared some of its shares in the company in the fourth quarter. 

Insurance Boost

Berkshire’s earnings rose despite Buffett’s warning in May last year that profits at most of its operations would fall in 2023 as an “incredible period” for the US economy draws to an end. With businesses including railroad, retail, construction and energy, Berkshire is closely watched as a litmus test for US economic health, particularly amid elevated inflation and interest rates.

Earnings at its collection of insurance businesses jumped to $2.6 billion, versus $911 million in the same period last year, thanks to improved results at its auto insurer Geico, fewer catastrophes and an increase in insurance investment income. The conglomerate’s railroad unit BNSF reported an 8.3% decline in earnings from the prior period, which Berkshire said was down to “unfavorable changes in business mix” as well as lower fuel surcharge revenues.

Berkshire reported $12.7 billion in earnings attributable to shareholders for the first quarter, compared to $35.5 billion for the same period a year ago, largely due to lower investment income. Buffett typically advises shareholders against relying on the firm’s net income figures because they include the swings of its stock portfolio value and don’t reflect performance of its vast group of businesses. 

Berkshire’s annual meeting kicked off in Omaha on Saturday, drawing thousands of Buffett devotees. It’s the first without Charlie Munger, Berkshire’s vice chairman and Buffett’s long-time investing partner, who died at 99 in late November.

(Updates with Buffett comment, analyst quote, Apple stake from third paragraph.)

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