Berkshire Hathaway Invests Billions Under New CEO Abel
Greg Abel directs $10 billion into Google's parent company and $4.5 billion in stock buybacks as Berkshire Hathaway's cash reserves decrease.
Berkshire Hathaway's new CEO, Greg Abel, has overseen significant financial maneuvers, including a $10 billion investment in Google's parent company and the repurchase of approximately $4.5 billion of the conglomerate's own shares. These moves contributed to a notable decrease in Berkshire's cash holdings, which fell to $365.5 billion at the end of the second quarter from nearly $400 billion in late March.
While the earnings report indicated an addition of over $21 billion in commercial, industrial, and other stocks to its portfolio, the specific names of these investments will be disclosed in a separate filing later this month. Abel assumed the CEO role in January, with founder Warren Buffett remaining as chairman.
Analysts view the share repurchases as a positive sign for investors, particularly following a period where such buybacks were less substantial. In the first quarter, Berkshire repurchased only about $234 million worth of its stock. The second-quarter buybacks, however, indicate a more aggressive stance, though they fall on the lower end of some investor expectations, which ranged between $5 billion and $11 billion.
Berkshire's policy is to repurchase shares only when Abel and Buffett believe they are undervalued. The majority of these repurchases occurred in June. The company also completed a $6.8 billion acquisition of homebuilder Taylor Morrison, although this transaction closed in July and is not reflected in the second-quarter earnings.
Berkshire Hathaway's reported net profit more than doubled to $25.667 billion, or $17,868.44 per Class A share. This increase was largely due to a significant paper gain in the value of its investments, compared to a $3.8 billion write-down in the value of its Kraft Foods stake in the previous year. A year ago, Berkshire reported earnings of $12.37 billion, or $8,600.89 per Class A share.
Buffett has consistently advised investors to focus on Berkshire's operating earnings, which exclude investment fluctuations, to better gauge the performance of its various businesses. By this measure, operating profit rose to $12.983 billion, or $9,038.30 per A share, up from $11.16 billion, or $7,759.58 per Class A share, in the prior year. Berkshire's diverse holdings include major insurers like Geico, utilities, BNSF railroad, and manufacturing and retail companies.