Stock market slide pushes Berkshire Hathaway to $50bn loss

Warren Buffett’s Berkshire Hathaway recorded a $49.7bn loss in the first three months of the year, as the sharp sell-off in global stock markets hammered its investment portfolio.

The sprawling conglomerate disclosed on Saturday that the decline in value of its stock and derivative portfolio, which includes shares in blue-chip groups such as Apple and Bank of America, generated a $55.6bn loss in the quarter. Multibillion-dollar mark-to-market losses in the quarter accompanied a 20 per cent drop in the S&P 500.

That decline more than offset the improvement in underlying earnings at Berkshire, which owns railroad Burlington Northern Santa Fe, insurer Geico and chocolate maker See’s Candies. Operating profits rose 5.7 per cent from a year earlier to $5.9bn, as investment gains from its insurance business climbed.

“The amount of investment gains [and] losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” the company said in a statement.

Berkshire’s cash pile swelled to a record $137bn and the group shifted a large portion of that into US Treasuries in the first quarter, a filing with US regulators showed.

Mr Buffett has for more than four years struggled to invest that cash in one of the major acquisitions for which the company is known. The so-called Oracle of Omaha has blamed high equity valuations in previous letters to investors as one of the main reasons the company has remained on the sidelines, as other large publicly traded groups went on acquisition sprees in recent years.

Berkshire instead purchased $1.7bn of its own common stock during the quarter, with much of that buying occurring in late-February and early-March as the price of its own shares were sliding alongside the broader market. But those purchases did not continue into the start of April, according to James Shanahan, an analyst who follows Berkshire at Edward Jones.

“If Buffett is not seeing opportunities in his own stock should we conclude the recent market sell-off isn’t a buying opportunity,” Mr Shanahan asked. “I don’t know what if anything is more important to ask Buffett today.”

Column chart of Cash, cash equivalents and short-term Treasury holdings ($bn) showing Berkshire's cash position swells to a record $137bn

The quarterly disclosure on Berkshire’s many subsidiaries showed only the early impact from the coronavirus outbreak, which is known to have killed more than 200,000 people and has sparked a severe economic downturn.

“As efforts to contain the spread of the Covid-19 pandemic accelerated in the second half of March and continued through April, most of our businesses were negatively affected, with the effects to date ranging from relatively minor to severe,” Berkshire said.

The group’s BNSF railroad reported a 6 per cent decline in revenues in the period, led by a drop-off in shipments of consumer products. Sales at aerospace-parts manufacturer Precision Castparts slid as Boeing suspended the manufacturing of its 737-Max jet and shipments to covid-affected businesses declined. NetJets suffered from lower demand while Clayton Homes, which makes and sells mobile homes, increased its provisions for loan losses related to the virus.

Insurer Geico was one of the bright spots for the company, as shelter-in-place guidelines across the US led to a drop in auto-related claims.

Berkshire said it was taking measures to cut costs and that some of its business lines had furloughed employees and reduced staff salaries. Shares of Berkshire have fallen 19 per cent this year to $273,975.

Investors will get a fuller update from Mr Buffett later on Saturday through a live video-cast. The company, which remains among the most highly valued publicly traded groups in the world, cancelled the festivities that normally surround its annual meeting due to the health crisis.

The tens of thousands of Berkshire shareholders who traditionally descend on downtown Omaha for the company’s annual meeting will instead hear his missives and those from Berkshire vice-chairman Greg Abel this year from their own homes.

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