Berkshire Hathaway (NYSE: BRK.A) has a very ordinary quarter, but by founder Warren Buffett's standards it was awful. The company's insurance operations were hurt by hurricane claims. The other factor that damaged earnings was losses on derivatives. Buffett is supposed to think derivatives are for idiots, so it is not clear how that part happened.
Berkshire's net income fell to $1.06 billion, or $682 per Class A share, from $4.55 billion, or $2,942, in the period a year ago. Operating profit fell 18% to $2.07 billion, or $1,335 per share, from $2.56 billion, or $1,655. According to Reuters, "It fell short of analysts' average expectation for $1,429 per share, according to Reuters Estimates."
No one in his right mind would go through Buffett's 10-Q. It is as thick as the New York City phone book. The company still has an astonishing $50 billion on its balance sheet, which means Berkshire has a great deal of capital to buy companies it thinks are undervalued during the recession, a favorite Buffett habit.
For anyone who cares, the tiny Berkshire group that controls private jet company NetJets, Dairy Queen, public relations operation BusinessWire, and the Buffalo News did just fine.
How Buffett does it is anyone's guess. Who makes sure BusinessWire is doing OK?
Douglas A. McIntyre is an editor at 24/7 Wall St.
Why do we have a weak dollar?
Holiday hiring slow for retailers
Closing Bell: What sell-off? (AIG, ABK, EPR, MBI, JAVA, ORCL, ERTS)
Reader Comments (Page 1 of 1)
11-08-2008 @ 7:57AM
Jason said...
I believe that the derivatives come from a company that Berkshire bought. Buffett is in the process of unwinding them but it takes time.
www.eeinvesting.com
11-08-2008 @ 8:49AM
JCH said...
A friend of mine is an early Buffett shareholder, and he had the same explanation.
11-08-2008 @ 9:18AM
MJP said...
Buffett is my hero!
11-08-2008 @ 9:41AM
juan said...
So Buffett made more than a billion in profits when most companies are about to dissapear?
I dont see what is wrong with that - i think the idiot is you.
11-08-2008 @ 11:00AM
suckitbuffet said...
lol donk, no one called anyone an idiot. l2p n00b.
11-08-2008 @ 3:52PM
dsmeryage said...
When Buffett preys on small family-owned companies during downturns and buys them up for pennies on the dollar, he is a hero to the liberal crowd. When his firm makes billions in profit, there is no talk of windfall profit taxes, yet that money is coming off the backs of the consumer in higher insurance costs in many cases. Anyone else see phony adoration here?
11-09-2008 @ 5:21PM
phil sharp said...
Many tell us that Buffet is an avid reader of www.twofatguyswithnothingtodo.com.....
America's source for information.