Berkshire on Saturday reported it has $128 billion in cash, up from $122 billion in the second quarter.
Berkshire Hathaway(BRKA) has lagged the market this year, and Buffett has said that he wants to make an "elephant" sized acquisition with the company's mountain of cash. The problem is that the market rally has made any potential targets much more expensive, and Buffett has said he doesn't want to overspend on deals.
Berkshire's operating profit rose to $7.9 billion, up from $6.9 billion a year earlier, boosted by gains across its holdings. The Omaha, Nebraska-based company's performance is tied to its many subsidiaries -- which include GEICO, railroad Burlington Northern Santa Fe and consumer brands like Duracell, Dairy Queen and paint maker Benjamin Moore -- as well as a massive investment portfolio.
While Berkshire has yet to make a major acquisition, the company has been taking steps to embrace more reasonably valued tech stocks in recent years. Berkshire Hathaway still owns large stakes in value stalwarts like Coke,(KO)Bank of America(BAC), Wells Fargo(CBEAX) and Kraft Heinz.(KHC)
But the company's biggest holding now is Apple(AAPL), and Berkshire even has a small stake in Amazon(AMZN).
Berkshire Hathaway also purchased $700 million of its own stock in the third quarter, an uptick from the $442 million it bought last quarter. The company purchased $1.7 billion of its own shares in the first quarter.
Previously, the company did not allow stock buybacks. The board changed a rule last year to allow the company to begin purchasing back billions of dollars worth of stock, a practice that has been criticized by some analysts as inflating share prices.
(Bloomberg) -- Berkshire Hathaway Inc.’s operating profit jumped 14% to a record as Warren Buffett’s conglomerate saw gains from its railroad and got some long-awaited earnings from Kraft Heinz Co.
Operating earnings climbed to $7.86 billion in the third quarter as investment income rose and Berkshire’s reinsurance group had the first underwriting profit in more than a year despite losses from a Japanese typhoon. Revenue climbed 2.4% on increases from the company’s insurers and manufacturing businesses.
The results pushed Buffett’s cash pile to a record $128 billion, even as he completed a $10 billion investment in Occidental Petroleum Corp., his chunkiest purchase in more than year. Aside from that deal, Buffett was a net seller of stocks in the quarter and bought back less of Berkshire’s own shares than some analysts expected, raising more questions over how long the legendary investor will wait to use his dry powder.
The fact that Buffett’s sprawling businesses are spitting out cash faster than he can find good places to invest it is a problem many companies would envy. But there are signs that the idle funds are weighing on growth, and Berkshire’s stock is on track for its worst underperformance since 2009. The company’s Class A shares gained 5.7% this year through Friday’s close, short of the 22% climb in the S&P 500 Index during that time.
Berkshire recognized $467 million in gains related to its share of Kraft Heinz’s profit in the first nine months of 2019. The gains came all at once after the stake left a blank spot in Berkshire’s results for two quarters as the packaged food giant delayed reporting results amid regulatory probes.
Buffett has been stung by Kraft Heinz’s stumbles over the past year. After Kraft Heinz announced a $15.4 billion writedown in February, Berkshire said it would take a $2.7 billion charge on its stake. Kraft Heinz released first-half results in August and was back on track in October, when it reported third-quarter profit that beat analyst estimates. That sent shares climbing to their highest level since May, though they’re still well below Berkshire’s carrying value. Berkshire said Saturday it didn’t believe an impairment charge was necessary at this time.
Buffett’s railroad was able to open up all key routes in the third quarter that had been impacted by flooding. The 5% profit gain at Berkshire’s railroad, BNSF, also benefited from higher rates on shipments even as volumes fell.
Berkshire’s $700 million of repurchases in the quarter was a nearly 75% increase from the amount of stock the company bought back in the second quarter. Still, third-quarter buybacks fell short of Berkshire’s record repurchase of $1.7 billion stock in the first quarter and was lower than the $900 million estimated by analysts at UBS Group AG.
While Buffett received more flexibility to buy back shares last year, his repurchases have been modest compared to other giant companies, especially financial firms. Bank of America Corp. said in June that it planned to repurchase more than $30 billion of its stock over the next year.
More key figures from the results:
Pretax earnings from Berkshire’s group of manufacturers, which includes Precision Castparts Corp. and Marmon, jumped 4.9% in the third quarter. That was boosted by gains at Precision due to demand for aerospace products and increases at Clayton Homes, which manufactures mobile homes and has been expanding into site-built construction.Net earnings slipped 11% to $16.5 billion. Under new accounting rules, Berkshire has to report swings in its investment portfolio in its net income figures. The unrealized gains during the third quarter were about $8 billion compared to a gain of $10.2 billion in the same period a year earlier.
(Updates with details throughout.)
To contact the reporter on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net
To contact the editor responsible for this story: Michael J. Moore at mmoore55@bloomberg.net
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An employee in a branded helmet is pictured at Saudi Aramco oil facility in Abqaiq, Saudi Arabia October 12, 2019.
Maxim Shemetov | Reuters
Saudi Arabia's Crown Prince Mohammed bin Salman on Friday agreed that the initial public offering of state oil giant Aramco will be announced on Sunday, five sources familiar with the matter told Reuters.
The world's top oil company will announce its intention to float on Nov. 3, the sources said.
"The crown prince finally gave the green light," one source said.
Aramco declined to comment.
Saudi Aramco officials and advisers have held last-minute meetings with investors over the past few days in an attempt to achieve as close to a $2 trillion valuation as possible ahead of an expected listing launch on Sunday, according to sources.
The final meeting by the Saudi government on Friday evening was to decide whether to go ahead with the listing.
To achieve $2 trillion, in the largest IPO in history, Riyadh needs the initial listing of a 1%-2% stake on the Saudi stock market to raise at least $20 billion-$40 billion.
The listing is the centerpiece of the crown prince's plan to shake up the Saudi economy and diversify away from oil. But there have been various delays since it was first announced in 2016.
Prince Mohammed wants to eventually list a total of 5% of the company. An international sale is expected to follow the domestic IPO.
WASHINGTON (Reuters) - U.S. job growth likely slowed sharply in October, weighed down by a strike at General Motors (GM.N), while the unemployment rate is expected to tick up from near a 50-year low of 3.5%.
FILE PHOTO: A "Help Wanted" sign reads "Not Hiring" in Livonia, Michigan, U.S., October 9, 2019. REUTERS/Brian Snyder
The 40-day strike by members of the United Auto Workers union, which came as hiring was already slowing, could make it difficult to get a clear pulse on the labor market and clues on the health of consumers, the economy’s engine.
The Labor Department’s closely watched monthly employment report on Friday will follow data this week showing a further slowdown in economic growth in the third quarter as a trade tensions-induced slump in business investment deepened.
The Federal Reserve cut interests rates on Wednesday for the third time this year, but signaled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.
“There is going to be more noise than signal in this employment report because of the GM strike,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pennsylvania.
According to a Reuters survey of economists, non-farm payrolls probably increased by only 89,000 jobs in October, with manufacturing shedding at least 50,000 positions, which would be the most since 2009. Employment rose by 136,000 jobs in September.
Government data last Friday showed 46,000 GM employees were idle at the automaker’s plants in Michigan and Kentucky during the period establishments were surveyed for October payrolls.
Striking workers who do not receive a paycheck during the payrolls survey period are treated as unemployed. The strike, which ended last Friday, had an impact on suppliers in the auto industry. That led economists to believe the work stoppage cut between 75,000 and 80,000 jobs from October payrolls.
Even without the strike distortions, job growth has been slowing this year, averaging 161,000 per month compared with an average monthly gain of 223,000 in 2018. The nearly 16-month trade war between the United States and China, which has undermined business investment, has been blamed for the slow job growth.
“We don’t want to ignore the impact the trade fight is having on business job decisions,” said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings in New York.
EYES ON WAGES
The Institute for Supply Management’s (ISM) employment measure for the manufacturing industry has contracted, likely suggesting manufacturers could be planning workforce reductions. ISM’s services sector employment gauge has also declined.
The GM strike is also seen limiting the rebound in wage gains in October. Average hourly earnings are forecast up 0.3% after being unchanged in September. That would lift the annual increase in wages to 3.0% in October from 2.9% in September. Wage growth peaked at 3.4% in February.
There are fears the business investment malaise could spill over to the labor market, which is underpinning consumer spending. Fed Chair Jerome Powell said he did not see this risk as the labor market remains solid., but not everyone is convinced.
“As it is, some contagion is already evident,” said Bob Schwartz, a senior economist at Oxford Economics in New York. “Small businesses are reporting cutbacks in hiring and investment plans. If this downbeat note reverberates in a meaningful way to households, spurring an upsurge in job insecurity, the last pillar to fall in a recession - consumer spending - would be at risk of crumbling.”
Solid consumer spending blunted some of the drag on the economy from weak business investment to limit the slowdown in growth to a 1.9% annualized rate in the third quarter. The economy grew at a 2.0% pace in the April-June quarter.
Though the household survey from which the unemployment rate is derived likely treated the striking workers as employed, the jobless rate is expected to have increased by one-tenth of a percent point to 3.6% in October. The household survey, which is volatile because of a small sample, showed 1.57 million jobs created in the last five months, far outpacing the payrolls gain reported in the bigger establishment survey.
FILE PHOTO: Striking union auto worker holds a sign on the picket line outside the General Motors Flint Truck Assembly in Flint, Michigan, U.S., October 9, 2019. REUTERS/Brian Snyder
“This discrepancy creates some risk of a sudden reversal in household employment that could lead to a sudden uptick in the unemployment rate, which would be particularly unsettling at a time when markets are focused on recession triggers or risks,” said Michelle Girard, chief economist at NatWest Markets in Stamford, Connecticut.
October’s anticipated strike-driven plunge in manufacturing will follow a drop of 2,000 jobs in September, which was the first fall in factory payrolls in six months. Manufacturing is struggling under the weight of trade tariffs, which the White House has argued are intended to boost the sector.
Construction employment is expected to have risen in October, though hiring has slowed from a peak of 56,000 jobs in January. Further gains are expected in government employment, in part because of hiring for the 2020 Census.
Reporting by Lucia Mutikani; Editing by Dan Grebler
WASHINGTON (Reuters) - U.S. job growth likely slowed sharply in October, weighed down by a strike at General Motors (GM.N), while the unemployment rate is expected to tick up from near a 50-year low of 3.5%.
FILE PHOTO: A "Help Wanted" sign reads "Not Hiring" in Livonia, Michigan, U.S., October 9, 2019. REUTERS/Brian Snyder
The 40-day strike by members of the United Auto Workers union, which came as hiring was already slowing, could make it difficult to get a clear pulse on the labor market and clues on the health of consumers, the economy’s engine.
The Labor Department’s closely watched monthly employment report on Friday will follow data this week showing a further slowdown in economic growth in the third quarter as a trade tensions-induced slump in business investment deepened.
The Federal Reserve cut interests rates on Wednesday for the third time this year, but signaled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.
“There is going to be more noise than signal in this employment report because of the GM strike,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pennsylvania.
According to a Reuters survey of economists, non-farm payrolls probably increased by only 89,000 jobs in October, with manufacturing shedding at least 50,000 positions, which would be the most since 2009. Employment rose by 136,000 jobs in September.
Government data last Friday showed 46,000 GM employees were idle at the automaker’s plants in Michigan and Kentucky during the period establishments were surveyed for October payrolls.
Striking workers who do not receive a paycheck during the payrolls survey period are treated as unemployed. The strike, which ended last Friday, had an impact on suppliers in the auto industry. That led economists to believe the work stoppage cut between 75,000 and 80,000 jobs from October payrolls.
Even without the strike distortions, job growth has been slowing this year, averaging 161,000 per month compared with an average monthly gain of 223,000 in 2018. The nearly 16-month trade war between the United States and China, which has undermined business investment, has been blamed for the slow job growth.
“We don’t want to ignore the impact the trade fight is having on business job decisions,” said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings in New York.
EYES ON WAGES
The Institute for Supply Management’s (ISM) employment measure for the manufacturing industry has contracted, likely suggesting manufacturers could be planning workforce reductions. ISM’s services sector employment gauge has also declined.
The GM strike is also seen limiting the rebound in wage gains in October. Average hourly earnings are forecast up 0.3% after being unchanged in September. That would lift the annual increase in wages to 3.0% in October from 2.9% in September. Wage growth peaked at 3.4% in February.
There are fears the business investment malaise could spill over to the labor market, which is underpinning consumer spending. Fed Chair Jerome Powell said he did not see this risk as the labor market remains solid., but not everyone is convinced.
“As it is, some contagion is already evident,” said Bob Schwartz, a senior economist at Oxford Economics in New York. “Small businesses are reporting cutbacks in hiring and investment plans. If this downbeat note reverberates in a meaningful way to households, spurring an upsurge in job insecurity, the last pillar to fall in a recession - consumer spending - would be at risk of crumbling.”
Solid consumer spending blunted some of the drag on the economy from weak business investment to limit the slowdown in growth to a 1.9% annualized rate in the third quarter. The economy grew at a 2.0% pace in the April-June quarter.
Though the household survey from which the unemployment rate is derived likely treated the striking workers as employed, the jobless rate is expected to have increased by one-tenth of a percent point to 3.6% in October. The household survey, which is volatile because of a small sample, showed 1.57 million jobs created in the last five months, far outpacing the payrolls gain reported in the bigger establishment survey.
FILE PHOTO: Striking union auto worker holds a sign on the picket line outside the General Motors Flint Truck Assembly in Flint, Michigan, U.S., October 9, 2019. REUTERS/Brian Snyder
“This discrepancy creates some risk of a sudden reversal in household employment that could lead to a sudden uptick in the unemployment rate, which would be particularly unsettling at a time when markets are focused on recession triggers or risks,” said Michelle Girard, chief economist at NatWest Markets in Stamford, Connecticut.
October’s anticipated strike-driven plunge in manufacturing will follow a drop of 2,000 jobs in September, which was the first fall in factory payrolls in six months. Manufacturing is struggling under the weight of trade tariffs, which the White House has argued are intended to boost the sector.
Construction employment is expected to have risen in October, though hiring has slowed from a peak of 56,000 jobs in January. Further gains are expected in government employment, in part because of hiring for the 2020 Census.
Reporting by Lucia Mutikani; Editing by Dan Grebler
Asian markets mostly gained in cautious trading Friday amid fresh doubts about the likelihood of a U.S.-China trade deal.
Bloomberg News reported Thursday that Chinese officials were expressing doubts about the chances of a comprehensive trade deal even if a “phase one” partial deal is signed. President Donald Trump, meanwhile, said the U.S. and China were looking for a new site to sign the “phase one” deal in November, since the upcoming Asia-Pacific summit in Chile was canceled.
U.S. stocks closed lower Thursday on the trade-deal concerns, more evidence of a slowdown in manufacturing and mixed corporate earnings.
WASHINGTON (Reuters) - U.S. job growth likely slowed sharply in October, weighed down by a strike at General Motors (GM.N), while the unemployment rate is expected to tick up from near a 50-year low of 3.5%.
FILE PHOTO: A "Help Wanted" sign reads "Not Hiring" in Livonia, Michigan, U.S., October 9, 2019. REUTERS/Brian Snyder
The 40-day strike by members of the United Auto Workers union, which came as hiring was already slowing, could make it difficult to get a clear pulse on the labor market and clues on the health of consumers, the economy’s engine.
The Labor Department’s closely watched monthly employment report on Friday will follow data this week showing a further slowdown in economic growth in the third quarter as a trade tensions-induced slump in business investment deepened.
The Federal Reserve cut interests rates on Wednesday for the third time this year, but signaled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.
“There is going to be more noise than signal in this employment report because of the GM strike,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pennsylvania.
According to a Reuters survey of economists, non-farm payrolls probably increased by only 89,000 jobs in October, with manufacturing shedding at least 50,000 positions, which would be the most since 2009. Employment rose by 136,000 jobs in September.
Government data last Friday showed 46,000 GM employees were idle at the automaker’s plants in Michigan and Kentucky during the period establishments were surveyed for October payrolls.
Striking workers who do not receive a paycheck during the payrolls survey period are treated as unemployed. The strike, which ended last Friday, had an impact on suppliers in the auto industry. That led economists to believe the work stoppage cut between 75,000 and 80,000 jobs from October payrolls.
Even without the strike distortions, job growth has been slowing this year, averaging 161,000 per month compared with an average monthly gain of 223,000 in 2018. The nearly 16-month trade war between the United States and China, which has undermined business investment, has been blamed for the slow job growth.
“We don’t want to ignore the impact the trade fight is having on business job decisions,” said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings in New York.
EYES ON WAGES
The Institute for Supply Management’s (ISM) employment measure for the manufacturing industry has contracted, likely suggesting manufacturers could be planning workforce reductions. ISM’s services sector employment gauge has also declined.
The GM strike is also seen limiting the rebound in wage gains in October. Average hourly earnings are forecast up 0.3% after being unchanged in September. That would lift the annual increase in wages to 3.0% in October from 2.9% in September. Wage growth peaked at 3.4% in February.
There are fears the business investment malaise could spill over to the labor market, which is underpinning consumer spending. Fed Chair Jerome Powell said he did not see this risk as the labor market remains solid., but not everyone is convinced.
“As it is, some contagion is already evident,” said Bob Schwartz, a senior economist at Oxford Economics in New York. “Small businesses are reporting cutbacks in hiring and investment plans. If this downbeat note reverberates in a meaningful way to households, spurring an upsurge in job insecurity, the last pillar to fall in a recession - consumer spending - would be at risk of crumbling.”
Solid consumer spending blunted some of the drag on the economy from weak business investment to limit the slowdown in growth to a 1.9% annualized rate in the third quarter. The economy grew at a 2.0% pace in the April-June quarter.
Though the household survey from which the unemployment rate is derived likely treated the striking workers as employed, the jobless rate is expected to have increased by one-tenth of a percent point to 3.6% in October. The household survey, which is volatile because of a small sample, showed 1.57 million jobs created in the last five months, far outpacing the payrolls gain reported in the bigger establishment survey.
FILE PHOTO: Striking union auto worker holds a sign on the picket line outside the General Motors Flint Truck Assembly in Flint, Michigan, U.S., October 9, 2019. REUTERS/Brian Snyder
“This discrepancy creates some risk of a sudden reversal in household employment that could lead to a sudden uptick in the unemployment rate, which would be particularly unsettling at a time when markets are focused on recession triggers or risks,” said Michelle Girard, chief economist at NatWest Markets in Stamford, Connecticut.
October’s anticipated strike-driven plunge in manufacturing will follow a drop of 2,000 jobs in September, which was the first fall in factory payrolls in six months. Manufacturing is struggling under the weight of trade tariffs, which the White House has argued are intended to boost the sector.
Construction employment is expected to have risen in October, though hiring has slowed from a peak of 56,000 jobs in January. Further gains are expected in government employment, in part because of hiring for the 2020 Census.
Reporting by Lucia Mutikani; Editing by Dan Grebler
