Investment

Berkshire Hathaway Reports Major Investment Losses in 2022

Published

2 years ago

February 25, 2023

After a $22.8 billion loss, Warren Buffett called the figure “100 percent misleading” and urged shareholders to focus on his empire’s overall health.

Not even Warren E. Buffett, one of the world’s most successful investors, was immune last year to whipsawing markets.

But as his conglomerate, Berkshire Hathaway, reported a big loss, the billionaire executive urged shareholders to focus on the long term and the underlying health of his empire, which includes insurance, railroads, energy and stock holdings in the likes of Coca-Cola, American Express and more.

Berkshire reported on Saturday that it lost $22.8 billion last year, driven by $53.6 billion in unrealized losses on its investments. That mirrored the experience of other investors, who were hit by market volatility as inflation rose swiftly and central banks responded by rapidly raising interest rates.

But in his annual letter to shareholders, Mr. Buffett pointed to the company’s operating earnings, which are drawn from its underlying businesses and exclude those paper investment values. On that basis, Berkshire earned a record $30.8 billion last year.

And its holdings of cash and equivalents have grown to $125 billion, giving Mr. Buffett more firepower to invest in stocks and, potentially, buy new companies.

Factoring Berkshire’s investment performance into its overall returns is “100 percent misleading,” Mr. Buffett wrote, since those results are likely to change easily quarter to quarter.

Berkshire’s vast business empire is often seen as a microcosm of American industry. And many of its subsidiaries reported being hurt by the broader economic forces affecting the country.

Weaknesses included Berkshire’s consumer products businesses, which reported a 23 percent drop in earnings last year from 2021, hurt by lower demand and higher costs for raw materials and shipping. In its annual report, Berkshire said that it expected continued soft demand in 2023 and that it planned to “right size” its operations and reduce product inventories.

The conglomerate’s core insurance businesses, which generate the cash that powers Mr. Buffett’s vast investments, also reported underwriting losses from catastrophic events, like hurricanes, and a rise in auto claims at Geico.

And BNSF Railway reported a slight drop in earnings, in large part because of the rising cost of fuel and lower volumes of shipments.

Still, in his annual letter to shareholders — a must read for scores of investors, eager to glean his thoughts on the global state of affairs — Mr. Buffett professed continued faith in the resilience of the United States.

“We count on the American Tailwind and, though it has been becalmed from time to time, its propelling force has always returned,” he wrote. “I have yet to see a time when it made sense to make a long-term bet against America.”

Much of the letter was spent defending Berkshire’s practices.

That included share buybacks, on which the company spent $7.9 billion last year. The practice has drawn criticism from lawmakers, including Senator Elizabeth Warren, Democrat of Massachusetts, who argue that it diverts money to Wall Street investors instead of to employee pay raises or new investments.

“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to C.E.O.s, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive),” Mr. Buffett wrote.

He also defended Berkshire’s federal tax bill, amid ongoing criticism that he himself pays little in taxes relative to his overall wealth, which Forbes estimates at $106 billion. In his letter, Mr. Buffett said that Berkshire had paid $32 billion in federal taxes over the past decade, representing a tenth of 1 percent of all taxes that the government collected during that time.

“Had there been roughly 1,000 taxpayers in the U.S. matching Berkshire’s payments, no other businesses nor any of the country’s 131 million households would have needed to pay any taxes to the federal government,” he wrote. “Not a dime.”

Mr. Buffett added a criticism of the federal government for spending significantly more than it collects in taxes, touching on a fight now bubbling in Washington over the debt ceiling. “Huge and entrenched fiscal deficits have consequences,” he wrote.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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