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With narrow-moat-rated BRK.A BRK.B reporting adjusted third-quarter operating results that were more or less in our range of expectations for the quarter, we are leaving our USUSUS$700,000 (USUS$467) per Class A (B) share fair value estimate in place for Berkshire stock.
Third-quarter revenue, including unrealized and realized gains/losses from Berkshire’s investment portfolios, increased 78.9% to USUS$113.5 billion from USUS$63.4 billion in the year-ago period. Excluding the impact of investment gains/losses and other adjustments, third-quarter operating revenue declined 0.2% year over year to USUS$93.7 billion.
Berkshire Hathaway: Moat Rating Lowered to Narrow as Firm Faces Diminishing Returns Over Time
Operating earnings, exclusive of investment gains/losses, decreased 6.2% year over year to USUS$10.1 billion during the September quarter as insurance underwriting results were negatively affected by both accrued losses tied to Hurricane Helene, as well as a reassessment of claims liabilities at GUARD insurance companies, during the third quarter. When including the impact of the investment gains/losses, reported operating earnings increased to USUS$26.3 billion from negative USUS$12.8 billion in the prior year’s period.
Book value per share, which still serves as a decent proxy for measuring changes in Berkshire’s intrinsic value, increased 6.7% sequentially and 23.0% year over year to USUS$446,906.
This was due in a large part to improvements in the company’s insurance operations as well as its equity investment portfolio.
As for the insurance investment portfolio, Berkshire reported US$4.5 billion of pre-tax investment income during the third quarter. This was up 56.6% from US$2.9 billion in the year-ago period as Berkshire lifted its stake in Treasury Bills to US$288.0 billion at the end of September 2024 from US$126.4 billion at the end of the third quarter of 2023.
That said, the company’s stock holdings declined to US$271.7 billion (US$301.8 billion when including its equity method investments in Occidental Petroleum and Kraft Heinz) from US$318.6 billion at the end of September 2023, owing in a large part to Berkshire cutting its stake in Apple by more than 50% and reducing its holding in Bank of America by 25% this year.
First Quarter Without Berkshire Stock Repurchases Since 2018
The company closed out the third quarter with a record US$325.2 billion in cash and cash equivalents, up from US$276.9 billion at the end of June 2024 (due primarily to US$36.1 billion of net sales from its stock holdings as free cash flow turned negative during the quarter).
Unfortunately, Berkshire did not repurchase any shares during the third quarter, the first time that the company has not bought back stock since CEO Warren Buffett started repurchasing shares on a more regular basis in the third quarter of 2018. We were not too surprised, as the shares have hewed relatively close to our fair value estimate for much of the year and exceeded those levels in the third quarter.
Berkshire, by our estimates, had around US$282.4 billion in dry powder on hand at the start of the fourth quarter of 2024 that could be committed to investments, acquisitions, and share repurchases.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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