Berkshire Hathaway's first quarter results increase, but Kraft Heinz is absent

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Berkshire Hathaway (BRK-A& nbsp;BRK-B) reported & nbsp;Results Q1& nbsp; it seems a little stronger than the analysts expected. "data-reactid =" 15 "> Berkshire Hathaway (BRK-A, BRK-B) reported first quarter results that seemed a little stronger than expected by analysts.

First quarter operating profit was $ 5.55 billion, up from $ 5.29 billion a year ago. This figure was higher than the $ 5.29 billion expected by analysts. (Please note that operating income does not include any quarterly gains or losses related to Berkshire's investment and derivatives portfolios.)

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "It is very important to note that the results of Berkshire include the impact of Kraft Heinz (KHC) recent woes. Berkshire holds a significant stake in the company. "Data-reactid =" 17 "> It is very important to note that Berkshire's results do not take into account the impact of the recent Kraft Heinz (KHC) setbacks, and Berkshire has a significant stake in the company.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "[[[[Click here to view the coverage of the Berkshire Hathaway 2019 Shareholders' Meeting.]"data-reactid =" 18 ">[[[[Click here to view the coverage of the Berkshire Hathaway 2019 Shareholders' Meeting.]

"As at May 3, 2019, Kraft Heinz had not filed its 2018 Form 1018 with the Securities and Exchange Commission. In addition, Kraft Heinz has not made its first quarter financial statements available to Berkshire in 2019. As a result, Berkshire does not have the financial information necessary to determine its share of Kraft Heinz's results for the first quarter of 2019. As a result, Berkshire's other operating results for the first quarter of 2019 exclude this amount. "

Management has announced that it will consider Kraft Heinz as soon as it reports its financial results.

"Other operating revenues in the first quarter of 2018 included $ 234 million related to Berkshire's investment in Kraft Heinz," they noted.

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The news arrives a few hours before & nbsp;General Meeting of Shareholders of Berkshire Hathaway 2019. "data-reactid =" 22 "> The news comes a few hours before the general meeting of Berkshire Hathaway 2019.

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The "meaningless" and "misleading" parts of Berkshire's results"data-reactid =" 23 ">The "meaningless" and "misleading" parts of Berkshire's results

Net profit, which became highly volatile as a result of a change in accounting rule, was $ 21.7 billion, or $ 13,209 per A share and $ 8.81 per B share. This compared to a loss of $ 1.1 billion a year ago. During the period, Berkshire benefited from an unrealized gain of $ 15.1 billion on its equity portfolio.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = ""The amount of investment gains / losses in any given quarter is generally meaningless and provides earnings per share figures that can be extremely misleading for investors who know little or nothing about accounting rules.Noted the direction of Berkshire. Data-reactid = "25"> "puts emphasis on theirThe amount of investment gains / losses in any given quarter is generally meaningless and provides earnings per share figures that can be extremely misleading for investors who know little or nothing about accounting rules.Noted the direction of Berkshire. Highlight theirs

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As mentioned above, the results of Berkshire Hathaway have become much more volatile lately, not because of the change in its business model. It is rather because of accounting.

A recent change by the Financial Accounting Standards Board (FASB) to Generally Accepted Accounting Principles (GAAP) requires companies to recognize in their quarterly earnings the short-term fluctuations in their equity investments. These are unrealized gains and losses – unrealized because they are paper losses and not actual losses (or realized gains and losses) from the sale of these securities.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "" This requirement will produce truly wild and whimsical results sways in our GAAP results, "said Buffett in his & nbsp;2017 Letter to Shareholders. "Berkshire holds $ 170 billion in marketable shares (excluding our shares of Kraft Heinz), and the value of these holdings can easily fluctuate by $ 10 billion or more over a quarterly reporting period . Including gyrations of this magnitude in the reported net result will overwhelm the really important numbers that describe our operational performance. & Nbsp;For analysis purposes, Berkshire's "bottom line" will be useless."" Data-reactid = "39"> "This requirement will produce truly wild and capricious fluctuations in our net income under GAAP," Buffett said in his 2017 letter to shareholders. "Berkshire holds $ 170 billion in marketable shares. Kraft Heinz dollars), and the value of these holdings can easily rock out by $ 10 billion or more over a quarterly reporting period, gobbling up the really big numbers that describe our operational performance. "Berkshire" Results " will be useless. "

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = ""[N]Charlie Munger, vice president of Berkshire, and I do not think this rule is reasonable, "wrote Buffett on the first page of his & nbsp;2018 letter to shareholders. "We both consistently believe that in Berkshire this market shift will produce what I have described as" wild and capricious moves in our bottom line. "" "Data-reactid =" 40 "> "[N]Charlie Munger, vice president of Berkshire, and I do not think this rule is reasonable, "wrote Buffett on the front page of his 2018 letter to shareholders. "On the contrary, we have both always thought that at Berkshire this change in approach to the market would produce what I describe as" wild and capricious swings in our bottom line "."

So what should investors do when they consult the quarterly income statement of a company with many equity investments?

"Our advice? Focus on your operating profits, paying little attention to gains and losses of all kinds. "

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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Sam Ro is editor at Yahoo Finance. Follow him on Twitter: @SamRo"data-reactid =" 57 ">Sam Ro is editor at Yahoo Finance. Follow him on Twitter: @SamRo

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