(BRK.A), (BRK.B)
While much of the media focused on Berkshire Hathaway’s lower first quarter earnings, which fell 27 percent, Warren Buffett reminded shareholders at the conglomerate’s annual meeting that Berkshire has over $90 billion in unrealized capital gains.
Berkshire reported that its net income was $4.06 billion, which translates to $2,469 per Class A share. This was down from $5.59 billion, or $3,401, for the first quarter of 2016.
As of March 31, 2017, Berkshire’s book value had increased by 3.5% since yearend 2016 to $178,073 per Class A equivalent share.
Weather related losses in its insurance businesses were one of the reasons for the earnings shortfall.
Buffett noted that taking some of those capital gains at any time would change the company’s quarterly earnings, and Buffett has always emphasized Berkshire’s intrinsic value, which is harder to quantify.
Buffett did note that Berkshire’s float, which comes from its numerous insurance operations, is up $14 billion.
There’s no doubt that the company is swimming in cash, which is now at a company record $90 billion, and Buffett appeared itchy to put some of that cash to work while keeping Berkshire safe in case of unforeseen hard times.
He noted that the $20 billion he often mentions as held as reserves is in his mind a bare minimum, and that he’s more likely to maintain a reserve closer to $24 billion.
© 2017 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.