Berkshire Hathaway Inc., led by legendary investment guru Warren Buffett, reported a second quarter drop of 10% in operating profit on the back of a decline in investment gains as well as a loss on underwriting in its insurance business.
The insurance underwriting division, which includes auto insurer GEICO, reported a loss of $38 million in comparison to the $411 million after tax profit the underwriting business contributed a year ago.
Warren Buffet, who is regarded by many as the most respected and successful investor in history, is often referred to as the “Oracle of Omaha” for his impressive investment abilities, and has built Berkshire Hathaway into an enormous conglomerate. According to FactSet data, the giant corporation has a market cap of about $354 billion.
The book value of Berkshire, which is a measure of its net worth, increased by 2.4% to $149,735 per Class A share during the first half of this year. The investment kitty used by Warren Buffett and his investment team had grown to $85.1 billion by the end of June 2015.
Berkshire has not paid a cash dividend to investors since 1967 in following the Buffett credo that there are more auspicious ways to allocate the company’s earnings. The company prefers investing the available cash back into the business in order to provide long-term value to shareholders. Berkshire Hathaway maintains an aggressive stock buyback policy that gives cash back to shareholders. Between 1964 and 2014, the company’s stock has increased in value by 700,000%. To put it in perspective, an investment of $1,000 in 1980 would have made the investor a millionaire at current values.
The latest coup by Warren Buffett sees the merger of giant food manufacturers H.J. Heinz Co. and Kraft Foods Group Inc. which he helped guide into place with Brazilian private-equity firm 3G Capital Partners. This deal has resulted in Berkshire Hathaway becoming the biggest shareholder in the new Kraft Heinz Company.
The company reported a profit of $4.01 billion or $2,442 per class A share. The previous year’s profit for the second quarter was $6.4 billion which translated to $3,889 per share.
Thomson Reuters has polled analysts and arrived at forecast earnings of $3,038 per A class share.
The class A shares closed at $215,462.7 per share, to record a year on year drop of 5% in their value.