An Andy Warhol-like print of Berkshire Hathaway CEO Warren Buffett hangs outside a clothing stand during the first in-person annual meeting since 2019 of Berkshire Hathaway Inc in Omaha, Nebraska, U.S. April 30, 2022.

Scott Morgan | Reuters

Berkshire Hathaway on Saturday reported a big jump in third-quarter operating earnings, while sitting on a record amount of cash as Warren Buffett saw few dealmaking opportunities.

The Omaha-based conglomerate’s operating earnings — which encompass profits made from the myriad of wholly owned businesses such as insurance, railroads and utilities — totaled $10.761 billion last quarter. That’s 40.6% higher than the $7.651 billion earned from the same quarter a year ago.

Berkshire held a record level of cash at the end of September — $157.2 billion — topping the $149.2 billion high set in the third quarter of 2021.

The “Oracle of Omaha” has been taking advantage of surging bond yields, buying up short-term Treasury bills yielding at least 5%. The conglomerate owned $126.4 billion worth of such investments at the end of the third quarter, compared to about $93 billion at the end of last year.

Buyback activity continued to slow down as Berkshire shares roared to a record high during the quarter. The firm spent $1.1 billion to repurchase shares, bringing the nine-month total to approximately $7 billion.

Berkshire Class A shares have rallied nearly 14% this year. After reaching an all-time high on Sept. 19, shares have fallen about 6% from the peak.

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Berkshire Hathaway Class A shares

Geico, the crown jewel of Berkshire’s insurance empire and Buffett’s “favorite child,” reported another profitable quarter with underwriting earnings of $1.1 billion. The auto insurer is in the middle of a turnaround after losing market share to competitor Progressive.

BNSF, however, saw a 15% decline in earnings as the railroad division grappled with lower volumes and higher costs.

Investment loss

Buffett’s company did post a significant investment loss of $24.1 billion in the third quarter, which largely came from a decline in its big Apple stake. Shares of the iPhone maker fell 11.7% during the quarter but have rebounded over 3% since.

As per usual, Berkshire Hathaway asked investors to look past the quarterly fluctuations in Berkshire’s equity portfolio.

“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings (losses) per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” the company said in a statement.

While Berkshire scored a sizable increase in operating earnings, the conglomerate did acknowledge the negative economic impact from the pandemic, as well as geopolitical risks and inflation pressures.

“To varying degrees, our operating businesses have been impacted by government and private sector actions to mitigate the adverse economic effects of the COVID-19 virus and its variants as well as by the development of geopolitical conflicts, supply chain disruptions and government actions to slow inflation,” Berkshire said. “The economic effects from these events over longer terms cannot be reasonably estimated at this time.”

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