Berkshire Hathaway (NYSE:BRK.B), the conglomerate run by Warren Buffett, had its best quarter of the year in Q3, but it did not move the needle much for its stock price.
Berkshire Hathaway had positive revenue and earnings gains and beat Wall Street’s expectations. However, the stock price was trending lower at the open on Monday, down about 1%.
The key result for Berkshire Hathaway is operating earnings, as it measures the success of the dozens of companies it owns, like GEICO, Dairy Queen, Duracell, among others. The net earnings incorporate results from its massive $283 billion investment portfolio, but they include unrealized gains and losses. So, if the portfolio gains assets in a particular quarter, earnings will go up, and vice versa. But it’s not truly earnings, just numbers in an account until the company cashes out.
So, the 34% gain in operating earnings is a welcome development, after operating went down year-over-year in the first two quarters of the year.
The biggest segment of the businesses that Berkshire owns is insurance. In Q3, the insurance segment drove earnings higher, with $2.37 billion in earnings from insurance premiums, up from $750 million in Q3 of 2024. The difference was far fewer catastrophic losses than the third quarter of last year, which was marked by several devastating hurricanes. This was somewhat offset by 13% lower insurance investment income of $3.2 billion.
Also, while its energy business reported lower revenue year-over-year, its railroads, manufacturing, retail, services, and other businesses all posted modest earnings gains in Q3.
The other part of Berkshire’s business, its investment portfolio, saw a $17.3 billion net gain, up from $16.2 billion in Q3 2024. This was generally due to a strong stock market in Q3, which lifted the assets in the portfolio from $257 billion to $283 billion.
But Berkshire was overall a net seller of stocks in the quarter, cashing in $12.5 billion in the sale of stocks and only buying about $6.3 billion worth of new stock positions in Q3. That made Berkshire a net seller of stocks in the quarter of about $6.2 billion.
Berkshire Hathaway continues to hoard cash. In Q3, its pile of uninvested assets reached a record $382 billion, up from about $344 billion last quarter.
Berkshire’s cash pile has been steadily increasing for years now, with cash and cash equivalents on the sidelines now far exceeding the $283 billion in assets in the portfolio.
It may be the big reason that investors were initially selling off Berkshire Hathaway stock in early trading on Monday.
The other concern, perhaps, could be that Buffett and Berkshire did not repurchase shares again for the fifth straight quarter. That could suggest to some investors that Buffett doesn’t think the stock is a good enough value right now, which some may interpret as uncertainty about where it’s headed.
That uncertainty may be reinforced by the management transition that is about to happen with Buffett stepping down as CEO at the end of the year.
Berkshire Hathaway stock is up just 5% YTD. It is trading at 17 times earnings, up from 12 in June. Its forward P/E is even higher at 22.
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