By Jonathan Stempel
(Reuters) – Warren Buffett’s Berkshire Hathaway Inc is being hit hard by the coronavirus pandemic, posting a record quarterly net loss of nearly $50 billion on Saturday and saying performance is suffering in several major operating businesses.
Berkshire said most of its more than 90 businesses have faced “relatively minor to severe” negative effects from COVID-19, the illness caused by the novel coronavirus, with revenue slowing considerably in April even at businesses deemed “essential.”
The BNSF railroad saw shipping volumes fall, Geico set aside money for car insurance premiums it doesn’t expect to collect, and some businesses cut wages and furloughed workers. Retailers such as See’s Candies and the Nebraska Furniture Mart closed stores.
Buffett also allowed Berkshire’s cash stake to rise to a record $137.3 billion from $128 billion at the end of 2019.
That reflected the 89-year-old billionaire’s inability to make large, “elephant” size acquisitions, now in its fifth year, and caution in buying more stocks. Berkshire repurchased $1.7 billion of its own stock.
Berkshire’s first-quarter net loss totaled $49.75 billion, or $30,653 per Class A share, reflecting $54.52 billion of losses from investments, mainly common stocks. A year earlier, net earnings totaled $21.66 billion, or $13,209 per share.
An accounting rule requires Berkshire to report unrealized stock losses and gains with earnings. This causes huge swings in Berkshire’s net results that Buffett considers meaningless.
Quarterly operating profit, which Buffett considers a better performance measure, rose 6% to $5.87 billion, or about $3,624 per Class A share, from $5.56 billion, or about $3,388 per share.
Year-earlier results reflected a charge on investments linked to what prosecutors called a fraud at a solar company. Operating profit at Berkshire’s business units fell 3%, with lower profit from BNSF, utilities and energy, and manufacturing, service and retailing businesses.
Vice Chairman Charlie Munger told The Wall Street Journal last month that a few small Berkshire businesses might close altogether.
The earnings come ahead of Berkshire’s annual meeting presentation. Buffett and Berkshire Vice Chairman Greg Abel will address shareholders on Saturday afternoon.
BERKSHIRE STOCK UNDERPERFORMS
Investors have been disappointed with Berkshire, whose stock price lagged the Standard & Poor’s 500 by more than 20 percentage points in 2019, including dividends.
While Buffett has said Berkshire’s own stock would outperform in down markets, it hasn’t this year. Through Friday, its shares were down 19% in 2020, compared with a 12% drop in the S&P 500.
U.S. gross domestic product fell at a 4.8% annualized rate in the first quarter, the Department of Commerce said this week in its advance estimate of economic growth.
Many economists expect a large double-digit percentage drop in GDP the second quarter. Nationwide jobless claims have since March 21 totaled about 30.3 million, or 18% of the workforce, a level not seen since the Great Depression.
The S&P 500 slid 20% in the first quarter, but many of Berkshire’s common stock investments fared worse, including American Express, Bank of America, Wells Fargo and four airlines — American, Delta, Southwest and United.
Berkshire was not a large net buyer of equities in the quarter, purchasing $4 billion and selling $2.2 billion.
(Reporting by Jonathan Stempel in New York; Editing by Megan Davies, Edmund Blair and Diane Craft)