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Buffett’s Berkshire pours into the bear market to buy stocks

(Bloomberg) – Berkshire Hathaway Inc. Warren Buffett’s is following an age-old adage: Buy the majority.

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The group was a net buyer of the stock during the quarter, reporting $3.8 billion in purchases, according to results released on Saturday. It was net sold in the second quarter of last year.

Berkshire stepped in as the S&P 500 fell 16% in the latest quarter. The Omaha, Nebraska-based company also reported operating profit of $9.2 billion as its insurance and railroad businesses hit a profit.

One business with potential warning signs is Geico, the company’s personal auto insurance unit, said Cathy Seifert, an analyst with CFRA Research. It reported an underwriting loss of $487 million, even as the group’s other insurance lines came in along with the division’s investment income.

But Seifert said the report as a whole reflects “fair revenue growth, still decent demand for various goods and services, offset by higher input costs and volatility in the global market,” said Seifert. stock market”.

‘Difficult point’

Berkshire said the loss at Geico was the result of higher claims due to rising used car prices and a shortage of auto parts. The company said policies in effect have declined even with premium increases, a potential sign that the business is losing market share as customers hunt for better rates elsewhere.

“They’re in a bit of a predicament right now,” Seifert said, adding that a similar trend is playing out at other auto insurers but seems to be affecting them particularly severely. to Geico. “Probably a good idea to monitor further deterioration.”

Market weakness that increases Buffett’s purchasing power is weighing on his company’s bottom line, at least on paper. The company reported a net loss of $43.8 billion due to a $53 billion loss in its portfolio. Berkshire presents those results as a function of accounting rules, saying they provide a misleading picture of the company’s actual performance.

What Bloomberg Intelligence says:

“Berkshire was a net buyer of stocks in Q2 with $3.8 billion, or $45.2 billion in 2022, compared to a net seller of $16 billion in 2020-21. We think this could continue and doesn’t necessarily signal Buffett is bearish on his stock; acquisition was previously a lower priority use of capital. $1 billion worth of acquisitions in Q2 fell from a pace of around $7 billion a quarter in 2021.”

– Matthew Palazola, senior insurance industry analyst at BI

Bloomberg calculated net buying by subtracting first-quarter numbers from total sales in the first half of the year.

Buffett’s appetite for his own stocks has waned even as he buys shares elsewhere. Share buybacks hit $1 billion in the second quarter, down from $3.2 billion at the start of the year. Insurance-investment income reached $1.91 billion.

The company also reported that Berkshire Hathaway Energy bought back $870 million in common stock from Vice Chairman Greg Abel in June. The previous transaction was not disclosed.

Despite spending heavily, Berkshire only made a substantial amount of cash. The company reported $105.4 billion at the end of June, barely budging from $106 billion at the end of the first quarter.

The positive pace with which Berkshire is buying shares of Occidental Oil and Gas Group has raised questions about whether Berkshire is looking to acquire the energy giant. But the company did not provide details about its strategy in this quarter’s regulatory filing.

(Adds insurance investment income. An earlier version adjusted for net equity purchases.)

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