Buffett's firm quadruples 3Q profit on investment gains

Buffett's firm quadruples 3Q profit on investment gains

Berkshire Hathaway reported an operating profit of $6.8 billion for the quarter ended September, sharply higher from $3.4 billion a year ago.

The firm also repurchased just under $1bn of stock, suggesting Buffet sees a shortage of appealing investment options. Underwriting income was $441 million in the third quarter versus a $1.4 billion loss in the same quarter of 2017.

Because the company is heavily invested in insurance companies, the profits previous year were weak partly the result of an quake in Mexico and major hurricanes Harvey, Irma and Maria.

Berkshire Hathaway Inc. owns more than 90 companies, including the railroad and clothing, furniture and jewelry businesses.

Berkshire said third-quarter net income rose more than 355 percent to $18.5 billion, though that reflected a new accounting rule requiring it to report unrealized investment gains with earnings. Insurance has always been central to Buffett's strategy, generating cash that the billionaire can then invest before paying claims.

Short-term investments in U.S. Treasury bills decreased to $59.9B from $78.5B.

Notably, Buffett's company bought back almost $1 billion in stock during the quarter - the first time that's happened in years - a possible sign that the world's most famous investor has been unable to find attractive investments to purchase. Buffett said the rule could lead to "wild and capricious" results and can mislead investors, who he said should look at operating profit instead.

Their day-to-day operations are overseen by Greg Abel and Ajit Jain, each seen by investors as a possible successor to Buffett, 88, as chief executive.

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Yet at Burlington Northern Santa Fe LLC, Berkshire's rail business, they were able to increase prices as more businesses ship by rail due to tight supply in the trucking market.

According to Zacks, analysts expect that Berkshire Hathaway will report full-year earnings of $9.90 per share for the current financial year, with EPS estimates ranging from $9.79 to $10.00.

Berkshire warned that insurance losses due to Hurricane Michael are now estimated in the $350 million to $550 million range for the fourth quarter. Buffett spent $928 million to repurchase 225 Class A shares and 4.1 million Class B shares during the quarter.

Berkshire Hathaway (NYSE:BRK.A) was upgraded by equities researchers at ValuEngine from a "hold" rating to a "buy" rating in a research note issued on Monday, October 8th.

Apple remains the most valuable stake Berkshire has in any one company, worth $57.6 billion as of September 30.

Class A shares closed at $308,411.01 per share and Class B shares at $206.57 on Friday.

Steven Check, president of Check Capital Management Inc, a Berkshire shareholder, said Berkshire's buybacks were a good sign.

A slump in Berkshire shares over the past month raises the question of whether Buffett will buy back more stock.