Warren Buffett’s Holding Company Berkshire Hathaway Reports Record Profits, Maintains High Apple Weighting

The star investor is reluctant to make new investments. His holding company sits on $147.4 billion in cash. He is sticking to the high weighting of Apple.

Warren Buffett, considered one of the best investors out there, has delivered again. Its holding company, Berkshire Hathaway, posted record profits of $35.9 billion in the second quarter. A year ago, Buffett posted a loss due to billions in devaluations of the company’s stock holdings.

Now the operating result increased by seven percent to ten billion dollars. Berkshire has a large stock portfolio, but it also has direct exposure to insurance companies, railroad companies, utilities, and energy companies. With a market value of $768 billion, Berkshire is one of the largest companies in the world. One of the holdings is the car insurer Geico. Geico had faltered for years, but now the company is benefiting from the higher interest rates that insurance companies generally suit. This fact also brought Geico the second quarterly profit in a row, this time in the amount of 514 million dollars. There were declines in the railway business: the freight railway BNSF received fewer freight orders.

Apple accounts for 46 percent of Berkshire’s $366 billion stock portfolio. The iPhone maker’s stock is up more than 40 percent year-to-date, although it has fallen back a bit since the presentation of the latest quarterly figures. No other position makes up more than 10 percent of Berkshire’s stock portfolio. American Express, Coca-Cola, Bank of America and the oil company Chevron account for between five and ten percent – all companies in which Berkshire has held interests for years.

High cash balances

Buffett is in no hurry to make new investments either. Berkshire sits on $147.4 billion in cash. Part of the 92-year-old’s strategy is being able to wait: “Value investing” is the name of the style for which he has become famous: He acquires companies that he considers to be well positioned but undervalued and waits for the market to buy them discovered. He prefers companies with established businesses, which is why he got on the technology bandwagon relatively late. One should only invest in companies that are so good that even an idiot could manage them, he once said. Because that’s what will happen at some point. With his strategy, Buffett has easily outperformed the market (even adjusted for dividends) for decades, but this year Berkshire lags behind the broad S&P stock index with a price gain of 14 percent.

In the past quarter, Berkshire repurchased $1.4 billion of its own stock, down from the first quarter ($4.4 billion). Berkshire does not pay out any dividends, everything is reinvested. There have never been any stock splits. As a result, the price of a Berkshire A share (with full voting rights) is now $533,600. This makes Berkshire the most expensive stock in the world. However, there is also an option to purchase B shares for $350. These correspond to one 1500th of the A share and also have a lower voting right.

“The quarter was strong, but the organic growth trends are not that robust,” said CFRA analyst Cathy Seifert, maintaining her neutral “hold” recommendation, as Reuters writes. “The question that will plague investors is how to position the company for strong growth without more frequent acquisitions.”

Getting rich slowly

Warren Buffett, the sixth-richest person in the world with a fortune of $118 billion, has become famous through steady rather than rapid growth. People keep asking him how to get rich quick, he once said. But he doesn’t know that. He only knows how to get rich slowly. But rarely does anyone ask that.