FRI, NOV 11, 2022
Berkshire sells more than half of its USB stake ...
After gradually trimming its U.S. Bancorp stake in recent years, Berkshire Hathaway has suddenly slashed it by 62%.
In an SEC filing this week, Berkshire disclosed that it held 52.5 million shares as of October 31.
In its most recent quarterly portfolio snapshot, it reported holding 137.4 million shares, including 17.6 million at its New England Asset Management subsidiary, as of June 30.
That's a reduction of 84.9 million shares, valued at $3.8 billion based on today's close of $44.92.
Berkshire now owns 3.5% of USB's outstanding shares, down from 9.2%. The filing was required because Berkshire's stake had fallen below 5%. Any further sales will not need to be disclosed until mid-February as part of its Q4 13F report.
The Q3 13F is due on Monday, and that will tell us how many shares, if any, were sold between June 30 and September 30.
Substantial USB sales in that timeframe seem likely, given that Berkshire's 10-Q report on Saturday indicated it sold around $5 billion of financial stocks during the third quarter.
... and accelerates its BYD selling
Based on last week's filing with the Hong Kong Stock Exchange, it took 61 days for Berkshire to reduce its stake in BYD, the Chinese electric car maker, from just below 18.9% to 17.9% by selling 10.4 million shares in September and October. That's an average of around 170 thousand shares per day.
Compare that to today's filing that reveals Berkshire sold almost 14.3 million shares (current value: $354 million) between November 1 and November 8. That's an average of 2.0 million shares per day.
As of that date, Berkshire owned 182.5 million shares, currently valued at $4.5 billion. That's 16.6% of BYD's outstanding shares. (Hong Kong rules only require a disclosure when a particular sale causes the percentage stake to cross a whole number.)
So far this year, Berkshire has sold 42.5 million shares (currently valued at more than $1 billion) of the 225 million shares it purchased in 2008 for around $230 million. That's a reduction of 18.9%.
So far, we haven't heard anything from Omaha on why the stake is shrinking.
Operating profits rise despite insurance losses
Berkshire Hathaway's operating businesses generated $7.8 billion in profits during the third quarter, an increase of 20% from the same period last year.
But there were significant areas of weakness for its insurance businesses, and a hint of harder times ahead.
In its 10-Q report for the period ending September 30, Berkshire reports a $759 million pre-tax underwriting loss for GEICO, because "increases in used car prices are producing increased claims severities on total losses and shortages of car parts are contributing to elevated claims severities on partial losses."
In addition, it says injury claims "continue to trend higher."
CFRA Research's Cathy Seifert tells Bloomberg that GEICO is "definitely a pressure point to watch at Berkshire."
Its insurance operations also lost $1.9 billion from catastrophe events during the quarter, "primarily" Hurricane Ian.
Remains of destroyed restaurants, shops and other businesses are seen almost one month after Hurricane Ian landfall in Fort Myers Beach, Florida, October 26, 2022. REUTERS/Marco Bello
Overall, Berkshire says that "while customer demand for products and services was relatively good in 2022, demand began to weaken in the third quarter at certain of our businesses. We continue to experience the negative effects of higher materials, freight, labor and other input costs."
Berkshire bought back a bit more than $1 billion of its own stock, a disappointment to some analysts who were hoping it would be closer to the first quarter's $3.2 billion.
The company says it had $109.0 billion in cash as of the end of September, up modestly from $105.4 billion for the previous quarter.
With interest rates rising, that cash is now generating more that the "pittance" Buffett lamented in 2017.
Berkshire's income from interest and other investments jumped by almost 182% to $256 million in the third quarter, prompting Edward Jones analyst James Shanahan to write, "Rising rates are enabling Berkshire’s still considerable cash balance ... to once again earn a competitive return."
Berkshire net earnings, which include unrealized gains or losses from its stock portfolio, fell by $2.7 billion in Q3, compared to a $10.3 billion gain last year.
As it does each quarter, Berkshire's earnings news release warns that since those investments bounce around in line with the market but are rarely sold, "The amount of investment gains/losses in any given quarter is usually meaningless ... (and) can be extremely misleading to investors who have little or no knowledge of accounting rules."
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BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Nov. 11, 2022
Berkshire's top holdings of disclosed publicly-traded U.S. stocks, and BYD, by market value, based on today's closing prices.
Holdings are as of June 30, 2022 as reported in Berkshire Hathaway’s 13F filing on August 15, 2022, except for:
The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.
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