(Bloomberg) — A subsidiary of Berkshire Hathaway Inc. Warren Buffett’s old saying: Buy a dip.
The conglomerate was a net buyer of shares in the quarter, posting $3.8 billion in purchases, according to results released on Saturday. It was a net seller in the second quarter of last year.
Berkshire stepped in, with the S&P 500 down 16% last quarter. The Omaha, Nebraska-based company also reported operating profit of $9.2 billion as its insurance and rail business posted gains.
One of the companies flashing potential warning signs is Geico, the company’s personal auto insurance unit, said Kathy Seifert, an analyst with CFRA Research. It reported a $487 million underwriting loss, even as the group’s other insurance lines rose along with the division’s investment income.
But Seifert said the report as a whole reflected “decent growth in earnings, and still decent demand for various goods and services, offset by higher input costs and volatility in stock markets.”
Berkshire said the losses at Geico were the result of higher claims due to higher prices for used cars and a shortage of auto parts. The company said the policies in place have waned even as premiums have increased, a possible sign that the company is losing market share as customers look for better rates elsewhere.
“They’re in a bit of a tough spot right now,” Seifert said, adding that the same trends are at play in other auto insurers but that they seem to hit Geico in particular. “It might be a good idea to watch for further deterioration.”
The same market weakness that increases Buffett’s purchasing power is weighing on his company’s results, at least on paper. The company recorded a net loss of $43.8 billion as a result of a loss of $53 billion in the company’s investment portfolio. Berkshire downplays these 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 shares in the second quarter of $3.8 billion, or $45.2 billion in 2022, versus a net seller of $16 billion in 2020-2021. We believe this may continue and does not necessarily indicate that Buffett is bearish in his stock; Buybacks have always been a lower priority use of capital. Repurchases of $1 billion in the second quarter fell from the 2021 pace of about $7 billion in the quarter. “
— Matthew Palazzola, Senior Insurance Industry Analyst at BI
Bloomberg calculated net purchases by subtracting the first-quarter numbers from the first-half total.
Buffett’s appetite for his shares waned even as his shares were piled up elsewhere. Stock buybacks posted $1 billion for the second quarter, trailing the $3.2 billion in buybacks at the start of the year. Investment and insurance income amounted to $1.91 billion.
The company also reported that Berkshire Hathaway Energy acquired $870 million in common stock from Vice Chairman Greg Appel in June. The deal was not previously disclosed.
Despite the spending spree, Berkshire has made only a small drop in the cash pile. The company reported $105.4 billion at the end of June, just barely budging from $106 billion at the end of the first quarter.
The blistering pace at which Berkshire bought shares of Occidental Petroleum Corp. But the company did not provide insight into its regulatory filing strategy for the quarter.
(Addition of insurance investment income. A previous version corrected the net equity purchase number.)