Those were pretty impressive results for a company worth 200 billion. If the news reported that Berkshire had seen its profits decline in the quarter, is that Mr. Buffett took a loss on its investment in the British retailer Tesco while during the same quarter in 2013, he had collected significant gains on its investments.
Investment losses for the quarter were $107 million against a profit of $1.4 billion in 2013.
On September 30, the book value of Berkshire was $144,542 per A share ($96.36 per B share), up 7.1% from December 31, 2013.
In all its major segments, Berkshire Hathaway increased its revenues and most have made profits on the rise.
The company generated $12,3 billion during the quarter and $24,2 billion for its first nine months of 2014. This explains why Berkshire is left with $62,4G in cash despite more than $10 billion investments of its activities.
On this last point, it is logical to meet a reader who asked the following question:
First, in its filings with the SEC (Securities and Exchange Commission of the United States), Mr. Buffett says he wants to maintain at all times a “cushion” of at least $20 billion in cash pledge of financial strength. You must never forget that the heart of the activities of Berkshire is insurance and an insurer’s ability to pay claims, regardless of the economic environment, is an important competitive advantage.
That said, while it is certain that Warren Buffett would rather invest a good portion of his cash, his first choice is to purchase 100% open and private companies, and his second choice is to add to his portfolio.
If he does not invest, it is because he does not see opportunities in the type of investments he believes in and which must necessarily be very large companies. To have a significant impact for an investment of Berkshire, which has a market value of more than $300 billion, a company must be worth billions!
Finally, Bloomberg published a text this morning suggesting that Mr. Buffett would have made a kick by taking control of the railway company BNSF in 2009. The investor himself had said he paid dear for Burlington Northern (and indeed, he noted that it had not been a bargain). And he was right. He paid something like his profit multiplied by twenty, which was high for him.
Curiously, at the time, many had just criticized Warren Buffett, noting the high cost of acquisition ($26.5 billion).
Today, almost five years later, BNSF revenues increased 57%, its profits doubled and the company has already paid more than $15 billion in dividends to its owner Berkshire Hathaway. Not much more is required to accuse Mr. Buffett of having “stolen” the company!
This is the experience of all investors to make investments happy where everything goes better than expected. This was the case for BNSF benefiting from another US oil boom that nobody doubted in 2009. Not even Mr. Buffett. In other words, he was lucky.