Coverage: Berkshire Hathaway posts a big profit jump

Warren Buffett’s Berkshire Hathaway on Saturday reported a sharp rise in second-quarter earnings, boosted by better performance in its insurance underwriting business and sizable profits from stock holdings now counted under a new accounting rule.

Adam Shell of USA Today had the news:

Buffett’s big conglomerate, which owns businesses ranging from insurers to railroads to retailers like Dairy Queen, reported net earnings of $12 billion in the April-through-June quarter. That profit was nearly triple last year’s results and marked a strong rebound from a rare loss of $1.1 billion in the first three months of the year.

Berkshire’s earnings were once again influenced by an accounting change that requires it to include unrealized gains or losses from its nearly $180 billion stock portfolio.

Unlike the first quarter, when volatile markets caused Berkshire to reduce its overall earnings by $6.3 billion due to a decline in the value of its equity holdings, this quarter a better-performing stock market resulted in a $4.5 billion boost to its overall earnings.

Berkshire’s top holding is Apple, a company that this past week became the first U.S. publicly traded stock to surpass a market value of $1 trillion on the strength of its iPhone success. Other big stock holdings include Coca-Cola, Wells Fargo and American Express.

Jackie Wattles of CNNMoney.com reported that Berkshire’s stake in Apple is now worth more than $50 billion:

And now that the tech giant is America’s first trillion-dollar company, Berkshire Hathaway’s 5% stake is worth nearly $50 billion, according to a regulatory filing posted Saturday. That’s by far the most valuable stake Berkshire has in any one company.

Berkshire made its first play at Apple just over two years ago at a time when investors were wary of the tech giant because of slowing iPhone sales. Berkshire purchased about 10 million shares that were worth a total of $1.1 billion at the time.

Berkshire has continued to snap up Apple stock incrementally, and the firm again boosted its stake in Apple during the first quarter of 2018. By the end of March, Berkshire owned more than 200 million shares worth about $41 billion. At the end of June, Berkshire’s quarterly report showed a $47.2 billion investment in Apple.

The endorsement from the Oracle of Omaha has helped propel the tech giant to the first $1 trillion valuation this week.

Nicole Friedman of The Wall Street Journal reported that profits were helped by Berkshire’s insurance holdings:

Berkshire reported second-quarter net earnings of $12 billion, or $7,301 per Class A share equivalent, from $4.26 billion, or $2,592 a share, in the year-earlier period.

Operating earnings, which exclude some investment results, rose to $6.9 billion from $4.12 billion in the year prior. Mr. Buffett has said operating earnings are more reflective of Berkshire’s performance.

The conglomerate runs a large insurance operation in addition to railroad, utilities, industrial manufacturers and retailers. Its holdings include recognizable names such as Dairy Queen, Duracell, Fruit of the Loom, Geico and See’s Candies.

Berkshire’s insurance business sits at the core of its moneymaking machine. Insurance brings in billions of dollars of “float,” upfront premiums customers pay and that Berkshire invests for its own gain.