Warren Buffett’s Berkshire Hathaway reports a drop in earnings

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Berkshire Hathaway, the insurance and investment conglomerate run by billionaire investment legend Warren E. Buffett, reported a sharp fall in first-quarter earnings on Saturday.

Profits for the company, which owns a variety of American brands from auto insurer Geico to ice cream chain Dairy Queen, fell to $5.4 billion. That was down 53 percent from the nearly $12 billion it made in the same three months a year ago. Those earnings were also lower than the $6 billion analysts had expected the company to earn in the quarter.

However, much of the decline was due to Berkshire’s large stock portfolio, which lost nearly $1.6 billion in the first three months of the year compared to a gain of nearly $5 billion in the first quarter of 2021. That decline reflected the performance of the stock market in general, which had its worst month in two years in April and was battered by investor fears of rising inflation and uncertainty from the war in Ukraine and the ongoing impact of the pandemic on global supply chains became.

The earnings report came as the company held its annual general meeting in person for the first time since the pandemic began. Mr. Buffett said at the meeting on Saturday that Berkshire has been buying shares in video game company Activision Blizzard since Microsoft announced its plans to buy Activision on Jan. 18 and now owns a 9.5 percent stake in the company.

The company’s financial records also showed that Berkshire had dramatically increased its investment in oil giant Chevron to nearly $26 billion by the end of the first quarter, up from just $4.5 billion at the end of 2021, making Chevron Berkshire’s fourth-largest holding . behind Apple, Bank of America and American Express. Mr. Buffett recently made big bets on the energy sector. Last month, the company also bought $7 billion worth of shares in Occidental Petroleum.

Revenue and earnings from Berkshire’s operations continued to grow during the quarter, defying the broader US economy slowdown in the first quarter. However, economists said the contraction in gross domestic product was hiding some underlying strength in the U.S. economy, and Berkshire’s operating results seemed to bear that out. Earnings at Berkshire’s manufacturing and retail companies rose 16 percent from the year-ago period. Profits at railroad company Burlington Northern, one of the largest freight networks in the United States, rose 9 percent, again reflecting continued activity.

Berkshire’s mixed first-quarter results came as tens of thousands of Mr. Buffett’s loyal investors flocked to Omaha, his hometown, for the company’s annual meeting. The Buffett Fest is a day-long folksy affair, often referred to as “Woodstock for capitalists,” where Mr. Buffett spends hours answering questions before a crowd in the 17,000-seat downtown arena. While there were some empty seats, several corporate greats were in attendance, including Apple CEO Tim Cook and JP Morgan Chase CEO Jamie Dimon, as well as Bill Ackman, head of hedge fund Pershing Square Capital Management, and actor Bill Murray .

A huge conference room floor was filled with booths highlighting Berkshire’s many businesses and offering discounts on things like boxes of See’s candies, also owned by Berkshire. Mr. Buffett said from the stage on Saturday that See’s brought 11 tons of candy to the shareholders’ meeting and is expected to sell out. Only shareholders can attend in person. The meeting has been held virtually for two years.

Mr. Buffett was critical of Wall Street while answering questions from shareholders at the meeting. He said the stock market has resembled “a gambling parlor” in recent years, adding that speculative behavior has been “encouraged by Wall Street.”

Mr. Buffett, 91, is facing a slightly more contentious annual meeting than usual, though Berkshire’s shares have gained nearly 8 percent this year, outperforming the broader market, which is down 13 percent. “Historically, Berkshire’s stock has outperformed during times of economic hardship when investors made a ‘flight to quality,'” Cathy Seifert, an analyst at CFRA Research that follows Berkshire, wrote in a note to clients last week .

Dissident shareholders have put forward a proposal asking Berkshire to revise its assessment and description of its climate risk, to which Mr. Buffett has refused. They say Berkshire Hathaway Energy, which manages a number of large utilities, has lagged behind its peers in defining plans to cut its carbon emissions. Last year’s climate proposal had the support of many larger shareholders outside of Mr. Buffett’s inner circle, including BlackRock, Vanguard, and State Street.

Additionally, a number of major investors, including the giant California Public Employees Retirement Fund, backed a shareholder proposal aimed at removing Mr. Buffett, who is currently both chief executive and chairman of the company, from his position as chairman. This proposal is one that larger investors have made at other companies, arguing that splitting the roles is better governance.

Mr. Buffett resisted the proposals, and they fell through on Saturday. Because he has a large number of votes, proposals that Mr. Buffett rejects are usually rejected.

Responding to the climate proposal on Saturday, he reiterated that Berkshire Hathaway Energy is making large investments in renewable energy projects. But those behind the proposal said they wanted Berkshire to report climate data for the entire company, not just parts of the conglomerate. “What we’re asking for is a composite picture,” said Timothy Youmans, an executive at EOS at Federated Hermes in North America, who was a sponsor of the climate proposal.

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