Warren Buffett's Berkshire Hathaway recovering from coronavirus woes

(Reuters) -Warren Buffett’s Berkshire Hathaway Inc on Saturday said many of its businesses are enjoying strong recoveries from the early depths of the coronavirus pandemic, fueling rebounds in profits and revenue.

FILE PHOTO: Warren Buffett, CEO of Berkshire Hathaway Inc, pauses while playing bridge as part of the company annual meeting weekend in Omaha, Nebraska U.S. May 6, 2018. REUTERS/Rick Wilking/File Photo

The company Buffett has run since 1965 also signaled the billionaire’s confidence in its future by repurchasing $6 billion of its own shares in the second quarter, even as its stock price regularly set new highs.

Omaha, Nebraska-based Berkshire’s manufacturing, service and retailing businesses suffered last year as economic activity plunged, job losses soared and shoppers stayed home.

But in its latest quarterly report, Berkshire said many businesses including the BNSF railroad, NetJets luxury planes, and namesake auto dealerships posted “significant” recoveries, with earnings and revenue sometimes topping pre-pandemic levels, despite supply chain disruptions and higher costs.

Another sign of improvement was Berkshire’s decision not to repeat a caution from its previous quarterly report that other operating units still faced adverse effects from the pandemic.

Second-quarter operating profit rose 21% to $6.69 billion, or about $4,424 per Class A share, from $5.51 billion, or about $3,463 per share, a year earlier.

Net income, including gains from common stocks such as Apple Inc and Bank of America Corp, rose 7% to $28.1 billion, or $18,488 per Class A share, from $26.3 billion, or $16,314 per share.

Revenue jumped 22% to $69.1 billion. Berkshire also owns such businesses as Geico auto insurer and See’s Candies.

The buybacks boosted Berkshire’s total share repurchases to more than $37 billion since the end of 2019.

Buffett has aggressively repurchased Berkshire shares as high stock market valuations and the growth of special purpose acquisition companies, which take private companies public, make buying whole companies appear too costly.

“It’s a killer,” Buffett said at Berkshire’s annual meeting on May 1, referring to SPACs.

Berkshire’s share count declined further in July, suggesting it has repurchased more stock.

NET SELLER

Valuations may have also played a role in Berkshire’s selling $1.1 billion more stocks than it bought in the quarter.

The net selling is one reason Berkshire ended June with $144.1 billion of cash and equivalents, despite the buybacks.

Net income was bolstered by unrealized gains in Apple, Bank of America and American Express Corp, where Berkshire’s investments ended June at $124.3 billion, $42.6 billion and $25.1 billion, respectively.

Accounting rules require Berkshire to report the unrealized gains even if it sells nothing, causing huge swings that Buffett considers meaningless.

The quarter was also notable for Buffett’s revealing that if he were to step down, Berkshire’s next chief executive would be Greg Abel, a vice chairman overseeing Berkshire’s non-insurance businesses. Buffett turns 91 on Aug. 30.

Berkshire shares are up 23.7% in 2021, outperforming the Standard & Poor’s 500’s 18.1% gain, but have significantly lagged the index since the end of 2018.

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