Jonathan Stempel
OMAHA, Nebraska (Reuters) – Berkshire Hathaway bought a huge stake in Apple in the first quarter as Warren Buffett's conglomerate's cash holdings swelled to a record $189 billion. significantly reduced.
Buffett's company also posted a record operating profit of more than $11 billion, as its insurance business benefited from improved underwriting and higher investment income as interest rates rose.
Berkshire's Apple stock was valued at $135.4 billion as of March 31, down 22% from $174.3 billion at the end of 2023, even though the iPhone maker's stock price fell just 11% in the quarter.
According to trends in Apple's stock price, Berkshire appears to have sold approximately 115 million shares, or 13% of its holdings, during the quarter, ending the quarter with approximately 790 million shares.
The big sale marks a turning point for Mr. Buffett, who is usually tech-phobic but has come to see Apple as a consumer goods company with strong pricing power and loyal customers.
But some investors have expressed concerns that Apple is taking too much of Berkshire's investment portfolio.
But the sale leaves Buffett with more than six times the minimum $30 billion cash cushion he promised to keep.
At Berkshire's annual meeting on Saturday, Buffett told shareholders that “unless something drastic happens that changes our capital allocation, Apple will be our top investment.”
He also said he “doesn't mind” expanding his cash commitment in light of stock market alternatives and conflicts around the world, saying cash could exceed $200 billion by the end of June. Stated.
With the sale of Apple, Berkshire realized an after-tax gain of $11.2 billion from investment sales in the quarter. Mr. Buffett insisted that he had no objection to paying taxes.
swell of profits
Operating income for the first quarter was $11.22 billion, or about $7,807 per Class A share, an increase of 39% from $8.07 billion in the same period last year.
“Berkshire continues to benefit from attractive yields from short-term investments and a large cash balance,” Edward Jones analyst James Shanahan said in a research note.
Net income fell 64% to $12.7 billion, or $8,838 per share, from $35.5 billion a year earlier, when Berkshire had significant unrealized gains on its stocks.
Accounting regulations require Berkshire to report these gains along with its financial results. Buffett urges investors to ignore the resulting volatility.
Berkshire also repurchased $2.6 billion of its own stock in the first quarter and a smaller amount in the first three weeks of April.
The results were announced ahead of Berkshire's annual shareholder meeting, part of a weekend gathering of tens of thousands of people in Omaha.
Mr. Buffett, 93, has led Berkshire since 1965, building it from an ailing textile company to a conglomerate with dozens of businesses, including Geico, BNSF Railway, Berkshire Hathaway Energy and Dairy Queen and See's Candies. transformed into.
This diversification has led many investors, not just Buffett fans, to view Berkshire as a stable long-term investment amid recession concerns and concerns about the banking industry.
GEICO supports electricity income
Insurance profits increased 80% to $5.2 billion. This includes Geico's underwriting profits more than doubling as it benefited from interest rate hikes and a significant reduction in the percentage of premiums used to pay accident losses.
BNSF Railway's profits fell 8%, due in part to lower fuel surcharges and an “unfavorable business mix.”
Berkshire Hathaway Energy's profits rose 72% as improved operating results from utilities offset higher litigation costs related to the settlement of a commission dispute with real estate brokerage HomeServices of America.
The energy business still faces a multibillion-dollar claim against its PacifiCorp unit over the 2020 Oregon wildfires.
(Reporting by Jonathan Stempel in Omaha, Nebraska; Editing by Jason Neely and Diane Craft)