Tags: warren buffett | berkshire hathaway | earnings | profit

Buffett's Berkshire Profit Jumps to Record $6.4 Billion on Investments

Friday, 01 Aug 2014 05:57 PM


Warren Buffett’s Berkshire Hathaway Inc. said second-quarter profit rose 41 percent to a record on investments, including a gain tied to the exit of most of his stake in the former publisher of the Washington Post.

Net income climbed to $6.4 billion, or $3,889 a share, from $4.54 billion, or $2,763, a year earlier, the Omaha, Nebraska-based company said in a statement. Operating earnings, which exclude some investment results, were $2,634 a share, beating the $2,482 estimate of three analysts surveyed by Bloomberg.

A rebounding U.S. economy has boosted the value of Berkshire’s stock portfolio and helped propel growth at the dozens of operating business that Buffett, 83, acquired during his four-decade tenure as chairman and chief executive officer. The subsidiaries include insurers, manufacturers, retailers, utilities and one of the country’s largest railroads, BNSF.

“When it’s all said and done, he has a lot of leverage to the U.S.,” said Bill Smead, chief investment officer at Smead Capital Management, which oversees about $970 million, including Berkshire stock.

Berkshire had a gain of $2.06 billion on derivatives and investments, driven by a share-and-asset swap with Graham Holdings Co., which sold the Post to billionaire Jeff Bezos. Post. That compares with a gain of $622 million a year earlier.

In the swap, Buffett turned over more than $1 billion in Graham stock, allowing him to exit the holding without incurring taxes on the gain. The shares had risen more than 100-fold since he bought the stake in the 1970s. In return, Graham turned over cash, a Miami television station and Berkshire shares.

Investment Gains

Net income for the three months ended June 30 surpassed the previous record of $5.13 billion in the fourth quarter of 2005, which was also driven by investments. In that period, Buffett recorded a gain on his holding in Gillette Co. after it merged with Procter & Gamble Co.

Berkshire’s Class A shares have risen 6.4 percent this year in New York, beating the 4.2 percent gain in the Standard & Poor’s 500 Index.

U.S. companies are reporting higher profits, consumer spending is picking up and the job market is strengthening as the country rebounds from the 2008 financial crisis. The gross domestic product rose at a 4 percent annualized rate in the second quarter, bouncing back after winter weather contributed to a contraction in the first three months of the year.

Those trends stand to benefit Berkshire. Most of the businesses Buffett has bought over the years are based in the U.S. and some of the largest holdings in his company’s stock portfolio — like Wells Fargo & Co. and International Business Machines Corp. — are American.

Energy, Ketchup

Buffett has also been adding to Berkshire’s stable of operating businesses. Last year, the energy unit bought Nevada’s largest electric utility for $5.6 billion and Buffett teamed up with buyout firm 3G Capital to take HJ Heinz Co. private.

The Heinz deal gave Berkshire half the equity in the ketchup maker and preferred shares that pay $720 million in dividends annually. Buffett has said that margins should improve as the managers that 3G installed cut costs.

Since the takeover was completed in June 2013, Heinz has eliminated thousands of jobs, announced factory closures and offered buyouts to staff at its Pittsburgh headquarters. It also announced its intention to end the pension plan in the U.S. for salaried and non-union workers.

“They’ve restructured the business model,” Buffett said of the Heinz managers during Berkshire’s shareholder meeting in May. “The brands are as strong as ever, and the cost structure is going to be significantly improved.”

© Copyright 2015 Bloomberg News. All rights reserved.

Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
Zip Code:
Privacy: We never share your email.
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Larry Summers: Europe, US on Brink of Deflationary Spiral

Friday, 23 Jan 2015 11:15 AM

Both Europe and the United States are on the brink of a "deflationary spiral," with Europe's economic morass possibly li . . .

Keep in Mind Tax Deductions for Sales Taxes, Charitable Expenses

Friday, 23 Jan 2015 13:08 PM

Don't look now, but tax season is coming upon us. Kiplinger has assembled a list of the most overlooked tax deductions. . . .

Krugman: 'Europe's Economy Wrecked in Name of Responsibility'

Friday, 23 Jan 2015 12:35 PM

Europe's fiscal austerity , and its monetary austerity before 2011 , have put its economy in the tank, says Nobel laurea . . .

Most Commented
Top Stories

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

America's News Page
©  Newsmax Media, Inc.
All Rights Reserved