OMAHA, Neb. – Warren Buffett’s company reported a sharp drop in profits on Saturday as the face value of its investments fell, but the tens of thousands of shareholders who packed an Omaha arena to hear Buffett answer questions at the annual meeting later could take heart in the good performance of Berkshire Hathaway’s many businesses.
Berkshire reported a profit of $12.7 billion, or $8.825 per Class A share, for the quarter. That’s about a third of the $35.5 billion, or $24,377 per A share, Berkshire disclosed a year ago.
But those numbers were heavily influenced by a big drop in the value of Berkshire’s investments. That’s why Buffett encourages investors to pay more attention to the conglomerate’s operating profits to the exclusion of investment numbers. By that measure, Berkshire’s operating profits jumped 39% to $11.222 billion from last year’s $8.065 billion as its insurance companies led a strong performance.
The three analysts surveyed by FactSet Research forecast operating profit of $6,701.87 per Class A share.
Berkshire reported underwriting profit of $2.6 billion at its insurers, up from $911 million a year ago.
BNSF railroad’s profits disappointed and fell 8% to $1.143 billion, but most of its many other companies posted solid results, including a 72% jump in operating profits at its utilities unit, which added $717 million. to Berkshire’s total.
Berkshire’s revenue grew 5% to $89.87 billion in the quarter. The two analysts who reported estimates to FactSet predicted revenue of $87.044 billion.
With no major acquisitions in sight, Berkshire’s massive cash pile continued to grow to a record $188.993 billion in the quarter. Berkshire spent as much as $2.6 billion on share repurchases during the first three months of the year, but its companies, which include insurer Geico, railroad BNSF, several large utilities and a variety of dozens of others, continue to generate mountains of money.
The main arena was already three-quarters full within half an hour of doors opening on Saturday, because people are always eager to get snippets of wisdom from billionaire Warren Buffett. But one key ingredient is missing this year: It’s the first meeting since the death of Vice President Charlie Munger.
“He was the sriracha sauce at the Berkshire Hathaway meeting,” said investor Bill Smead, a regular at the event for 14 years.
For decades, Munger has shared the stage with Buffett every year for the marathon Q&A that is the centerpiece of the event. Munger often let Buffett take the lead with expansive answers that lasted several minutes. Then Munger himself would get straight to the point. He is remembered for calling cryptocurrencies stupid, telling people to “marry the best person you want,” and comparing many unproven internet businesses in 2000 to “crap.”
He and Buffett functioned like a classic comedy duo, with Buffett offering long build-ups to Munger’s witty one-liners. Together, they transformed Berkshire from a struggling textile mill into a huge conglomerate made up of a variety of interests, from insurance companies like Geico to BNSF railroads to several major utilities and a variety of other companies.
Munger often summarized Berkshire’s main success as “trying to be consistently not stupid rather than trying to be too smart.” He and Buffett were also known for branching out into businesses they knew well.
“Warren always did at least 80% of the talking. But Charlie was a great foil,” said Whitney Tilson, an analyst at Stansberry Research, who was looking forward to their 27th consecutive meeting with a heavy heart because of Munger’s absence.
This absence, however, could create space for shareholders to get to know better the two executives who directly supervise Berkshire companies: Ajit Jain, who manages the insurance units, and Greg Abel, who manages everything else. Abel will one day replace 93-year-old Buffett as CEO.
Morningstar analyst Greggory Warren said he expects Abel to talk more this year and allow shareholders to see some of the brilliance Berkshire executives talk about. Since Munger let slip at the annual meeting three years ago that Abel would be the successor, Buffett has repeatedly assured investors that he is confident in the choice.
Experts say the company has a strong culture based on integrity, trust, independence and an impressive management roster ready to take over.
“Greg is a rock star,” said Chris Bloomstran, president of Semper Augustus Investments Group. “The bench is deep. He won’t have the same mood at the meeting. But I think we all come here to get a reminder every year to be rational.”
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