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Warren Buffett's company lost $44 billion. It's not bad news

Berkshire Hathaway (BRKB) reported Saturday that the massive conglomerate posted a net loss of nearly $44 billion in the second quarter, red ink that was due mostly to a big drop in the value of Berkshire’s significant stock portfolio.
Berkshire owns large stakes in Apple (AAPL), Bank of America (BAC), Coca-Cola (KO), Chevron (CVX) and American Express (AXP). Those five stocks make up nearly 70% of the portfolio. Chevron and Coke have both rallied this year but tech stocks and financials have been significant market losers.

But the steep loss in the value of Berkshire’s portfolio is not the whole story. The firm actually reported an operating profit of $9.3 billion in the quarter, up nearly 40% from a year ago.

That gain was due in part to higher interest rates boosting portions of its colossal insurance unit. There were also jumps in earnings from Berkshire’s railroad, utility and energy businesses.

Berkshire owns Geico, Burlington Northern Santa Fe, PacifiCorp and MidAmerican Energy Company as well as big consumer brands such as Fruit of the Loom, Duracell, Dairy Queen and a large stake in Kraft Heinz (KHC).

Big rebound for Berkshire in the past two years

Berkshire’s many businesses have bounced back sharply from the depths of the Covid-induced slowdown in the economy in 2020.

“Because the Covid-19 pandemic negatively impacted most businesses, including Berkshire, in early 2020, comparing current results to pre-pandemic 2019 results is helpful” Bill Stone, chief investment officer of the Glenview Trust Company and a Berkshire shareholder, said in a report. “Operating earnings for the second quarter of 2022 are 51% above 2019.”

But many investors pay close attention to Berkshire to see what Buffett, vice chairman Charlie Munger and top Berkshire investing lieutenants Ted Weschler and Todd Combs think about the stock market. Apparently they remain bullish.

Berkshire reported about $3.8 billion in net stock purchases during the second quarter. That’s on top of the more than $40 billion in stocks Berkshire bought during the first quarter.

Buffett’s firm also bought back $1 billion of its own shares during the quarter, a move that helps boost earnings per share.

Berkshire has been aggressive throughout the market downturn, scooping up a sizable stake in oil giant Occidental Petroleum (OXY) and announcing an $11.6 billion deal for insurer Alleghany earlier this year.

The company’s stock has held up better than the rest of the market in 2022. The super pricy class A shares, which trade for around $445,000 apiece because they don’t split, are down about 2%. So are the shares of the class B stock, which cost a little less than $300 each and are in the S&P 500.

CFRA Research analyst Cathy Seifert said in a report after the earnings release that she sees “stable results in most segments” for Berkshire.

Shares of both classes of Berkshire Hathaway were up slightly in early morning trading Monday.

Buffett, who will turn 92 on August 30, has given no indication that he plans to step back from his roles as Berkshire CEO and top portfolio manager just yet.

But the company has already announced that Greg Abel, the 60-year old vice chairman of all of Berkshire’s energy and other non-insurance units, will eventually take over for Buffett.

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