Buffett's Berkshire doubles profits and buys $ 900 million in third-quarter shares

NEW YORK (Reuters) – The conglomerate led by billionaire Warren Buffett, Berkshire Hathaway Inc., said Saturday that its quarterly operating profit had doubled, as its insurance business helped prevent hurricanes and reduce taxes.

This solid result gives Buffett more money to deploy, even as the famous "value" investor sought to find a place to use that income and buy back $ 928 million worth of his own quarterly stock.

Operating profit in the third quarter doubled to $ 6.88 billion from $ 3.44 billion a year earlier, and higher than the $ 6.11 billion expected by Wall Street, according to IBES data of Refinitiv.

The Company's insurance business was aided by the reduction in the estimated liability for P & C insurance in previous years and the reduction of taxes. The previous year, it included significant losses due to three US hurricanes and an earthquake in Mexico.

Revenues from insurance sales were $ 441 million in the third quarter compared to a loss of $ 1.4 billion for the same period last year.

"This is absolutely one of the biggest quarterly results ever published by any US company," said Bill Smead, managing director of Berkshire shareholder Smead Capital Management.

According to Berkshire, third-quarter net income increased more than 355% to $ 18.5 billion, although this reflects a new accounting rule requiring it to report unrealized gains on investments with earnings. Buffett said the rule could lead to "wild and capricious" results and could mislead investors, who should instead look for operating profit.

Berkshire's effective tax rate for the third quarter was 19.2%, compared to 25.3% for the same period last year, as a result of a reduction in the corporate income tax rate. President Donald Trump promulgated last December. The results published by many US companies have been skewed by the impact of the law.

More than $ 100 million to spend

The insurance provides a cash flow that Berkshire can invest worldwide. Floating premiums, or pre-claims insurance premiums that helped finance Berkshire's growth, reached $ 118 billion in September. The company has $ 103.6 billion in cash, short-term treasury and similar investments.

Buffett's last major acquisition dates back to January 2016, when Berkshire paid $ 32.1 billion to Precision Castparts, a manufacturer of aircraft parts. In July, the company announced a relaxation of its policy, preventing Buffett from buying back its shares at current prices.

Berkshire is based in Omaha, Nebraska, and has more than 90 companies in the insurance, chemicals, energy, food and retail sectors, industrial parts, railways and others.

Their daily activities are overseen by Greg Abel and Ajit Jain, whom investors perceive as a possible successor to 88-year-old Buffett as general manager. Buffett and 94-year-old Charlie Munger, vice-chairman of the board of directors, take charge of the main capital allocation decisions.

Berkshire's profits have improved in each of its major business units. Their results painted the picture of a US economy that continues to grow, but faces rising costs, in part because of the imposition of tariffs by the Trump administration. In its construction products and grocery and restaurant operations, for example, Berkshire announced an increase in fuel and raw material costs, hurting profits.

Yet, at Burlington Northern Santa Fe LLC, the Berkshire railroad, they were able to raise their prices because more and more companies are doing rail transportation because of the contraction of supply in the trucking market. .

Berkshire warned that insurance losses due to Hurricane Michael are currently estimated at between $ 350 million and $ 550 million for the fourth quarter.

SUB-PRICE?

Class A shares of Berkshire closed Friday at $ 308,411.01 per share, generating a total return of 3.6% for the year, a little ahead of the 3.4% return of the S & S index. P 500. And the Company's book value per Class A share, reflecting assets less liabilities and a preferred measure of Buffett's growth, was $ 228,712 on September 30, an increase from at $ 217,677 a quarter ago.

Among his favorite investments, Buffett engulfed shares of Apple Inc. Berkshire's stake in Apple was $ 57.6 billion at the end of the last quarter, up from $ 47.2 billion at the end of June.

Apple's shares fell nearly 7% on Friday, bringing its market value to less than $ 1 trillion after announcing lower-than-expected sales for the holiday quarter and fueled the nerves of sales. IPhone, announcing that he would no longer publish these figures.

Steven Check, chairman of Berkshire shareholder Check Capital Management Inc., said Berkshire's redemptions bode well.

"It makes sense to me, because stocks traded at higher valuations for most of the quarter than they were bought," said Check.

"This again confirms what we have known for a long time, namely that stocks have been undervalued."