© Reuters.
Daniel Schwartzman
Investing.com — Berkshire Hathaway (NYSE:) Warren Buffett-led insurance and industrial conglomerate (NYSE:) is set to post record operating results in 2022, despite last year’s Wall Street bear market showing a significant loss to its net income line. reported profit.
Berkshire Hathaway’s operating profit, Buffett’s favorite number to measure the company’s growth, is 12.2% higher than its 2021 figure as it’s adjusted to remove annual net capital gains or losses. was $30.79 billion. GAAP net income was a loss of $22.8 billion. In his annual letter to shareholders, published on Saturday, Buffett reiterated his preference for focusing on operating income, saying that “quarterly fluctuations in capital gains are regularly and unwittingly covered by the media and investor interest.” It is completely misleading,” he said.
In fact, Berkshire Hathaway’s book value also declined in 2022, with the decline in Berkshire’s stock value outweighing the decline in book value.
Berkshire Hathaway’s annual report, Buffett’s annual letter, and Berkshire’s annual shareholder meeting in May all show Buffett sharing his accumulated insight into the state of the economy with his partner and vice chairman of Berkshire Hathaway. Given that it has amassed with Charlie, who is , it is avidly followed as an indicator of the state of the economy. Munger – and the conglomerate nature of Berkshire Hathaway provides a read through to the wider economy.
Highlights from Buffett’s letter and report include:
To Defend Corporate Citizenship in Capitalism, the United States, and Berkshire
Buffett’s letter includes questions about his portfolio, Berkshire Hathaway’s post-Buffett future, or whether markets are doing a fairer assessment after saying “few things excite us” a year ago. There was a lack of comments about
Instead, he appeared to be having philosophical and political discussions. Buffett revealed the value of the share buyback, noting that Berkshire Hathaway reduced its share count by 1.2% from its 2021 Annual Report to its 2022 Annual Report for the benefit of shareholders (78 in 2022). buy back $50 million of stock). But he also said: all Buybacks are harmful to shareholders again to the country, again especially beneficial To CEO, you that is listening To again of economical illiteracy again a Silver Tongue Demagogue ( no are mutually exclusive),” he said, but perhaps
Buffett also pointed out that Berkshire paid $32 billion in corporate taxes over the decade to 2021 as a reminder that Berkshire is doing its part. This, combined with lauding Berkshire’s Hathaway shareholders who tend to donate their wealth to charity, has resulted in defending Berkshire’s place in the US social fabric.
However, he ties it to his continuing defense of America, stating: When it makes sense to make long-term bets against America.and i highly doubt it Readers of this letter will have a different experience in the future.”
Turning point for GEICO?
Berkshire’s insurance business posted a profit of $234 million in the fourth quarter after a loss of $90 million for the full year. GEICO has been a major source of losses compared to previous years and has struggled with pricing amid growing severity of claims (partly linked to inflation in used car prices) .
Auto insurers still posted losses of $440 million in the fourth quarter, down from the third quarter. The report cited lower underwriting costs associated with lower advertising, an 8.9% decline in annual active policies, and an 11.3% increase in average annual pricing. This suggests that GEICO is adapting to a worsening business by reducing competition from less profitable businesses. Keep used car inflation moderate – claim severity has risen 14-16% for crashes and 21-22% for property damage – and he says GEICO may be stronger in 2023 I can’t.
Berkshire at least thinks so, saying it expects an annual underwriting profit from the unit.
Inflation vs.recession
Berkshire’s various businesses, while benefiting from higher prices, were struggling with higher costs and lower volumes. The question is whether these dynamics will continue, or whether we will see a recession or, conversely, a soft landing.
Berkshire’s rail division posted revenues up 11.9%, but operating profit fell 2.4% and net profit fell 0.7%. The Energy & Utilities business increased its profit by 9.3% and the manufacturing sector increased its profit by 12.5%. As for the latter, however, the company wrote that “in some businesses, demand began to weaken in the second half of the year.”
Importance of long-term investment
Buffett didn’t comment much on Berkshire Hathaway’s portfolio position, but he did talk about the secret sauce to his investment strategy: long-term thinking and focus.
Buffett cites Berkshire’s position at Coca-Cola (NYSE:), american express (NYSE:), acquired in 1994 and 1995 for $1.3 billion each, and now returning a combined $1 billion in dividends to Berkshire (38.5% cost yield). I’m happy.”far Spectacular,” Buffett wrote. The key, as he noted, is that each position is worth his 5% of Berkshire’s current net worth, worth $25 billion (Coke) and $22 billion (Amex) for him, respectively. capital appreciation.
Buffett’s conclusion: “Lesson for investors: When flowers bloom, weeds die in important ways. As time goes on, it takes just a few winners to work miracles. And yes, early on.” It also helps me start and live into my 90s.”
This may explain why it is not included in the company’s latest Form 13F filing. Not everything happens in a given quarter.
Check out historical stats about Berkshire Hathaway.