ETF Lessons to Learn from Berkshire Earnings

Veteran investor Warren Buffett’s Berkshire Hathaway (BRK.B) reported second-quarter earnings in late last week. Operating earnings rose 7% to $10.04 billion year over year, with revenues up 21% to $92.5 billion. Analysts expected Berkshire earnings to fall 8% year over year to $3.87 a share, with revenue up nearly 6% to $80.58 billion.

The companies’ insurance underwriting profit skyrocketed 74%. Insurance investment income also rose solidly. Those made up for a 24% drop in the BNSF railroad’s profit, per Warren Buffett bought just $1.4 billion of Berkshire stock in the second quarter, probably due to higher prices of stock. In Q1, Berkshire bought back $4.4 billion, up 57% from Q4 and the most since Q1 of 2021.

Below we highlight the key pointers from the earnings report and see how these can form winning ETF strategies for investors.

Does AI Deserve a Must-Have Place in Portfolio?

About 47% of Warren Buffett’s $375 billion portfolio is invested in three Artificial Intelligence (AI) stocks, per Motley Fool. These three stocks are Apple AAPL, Amazon AMZN and Snowflake SNOW. The company’s stake in Apple surged to $177.6 billion by the end of Q2. Buffett’s 5.8% stake in Apple continues to be the pillar of Berkshire’s equity portfolio, per Investopedia.

Hence, ETFs like Global X Robotics & Artificial Intelligence ETF (BOTZ) deserves a place in your portfolio. Apart from this, investors can play Apple-heavy ETFs Technology Select Sector SPDR Fund XLK and Fidelity MSCI Information Technology Index ETF (FTEC), Amazon-heavy ETFs ProShares Online Retail ETF ONLN and Vanguard Consumer Discretionary ETF (VCR) and Snowflake-heavy ETFs like Renaissance IPO ETF IPO.

Cash in King

Berkshire continued to grow its massive cash stockpile, adding $16.7 billion in cash and short-term securities in the quarter. Total cash now stands at $147.4 billion.

Notably, some customers have been avoiding the banking system altogether lately and moving their money to U.S. money market funds in quest of higher yields. As the Fed started to raise interest rates to cool the economy, depositors started searching for higher-yield options.

Investors can play cash-like ETFs which include JPMorgan Ultra-Short Income ETF JPST, First Trust Low Duration Strategic Focus ETF LDSF and Arrow Reserve Capital Management ETF (ARCM). These ETFs offer 3.61%, 3.58% and 2.65% yield, respectively (read: Where are Americans Parking Money? ETFs in Focus).

Insurance Stocks in Sweet Spot?

Warren Buffett’s Berkshire Hathaway recorded gains in operating profit helped by its insurance businesses which helped mitigate inflationary pressures. SPDR S&P Insurance ETF KIE has advanced 4.9% past month (as of Aug 4, 2023)., Inc. (AMZN): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report

Technology Select Sector SPDR ETF (XLK): ETF Research Reports

Snowflake Inc. (SNOW): Free Stock Analysis Report

Renaissance IPO ETF (IPO): ETF Research Reports

SPDR S&P Insurance ETF (KIE): ETF Research Reports

Global X Robotics & Artificial Intelligence ETF (BOTZ): ETF Research Reports

JPMorgan Ultra-Short Income ETF (JPST): ETF Research Reports

ProShares Online Retail ETF (ONLN): ETF Research Reports

First Trust Low Duration Strategic Focus ETF (LDSF): ETF Research Reports

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Zacks Investment Research

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