Over the weekend, Warren Buffett (Trades, Portfolio)'s $639.05 billion conglomerate, Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial), reported strong first-quarter results as its businesses began to recover from the effects of the pandemic.
For the three months ended March 31, the Omaha, Nebraska-based company posted net income of $11.71 billion, equating to earnings of $7,638 per Class A share. This was a significant improvement from the $49.75 billion loss it suffered a year ago as a result of the Covid-19 pandemic lowering the value of the company's many equity investments.
Revenue increased slightly from the prior-year quarter to $64.6 billion, surpassing Refinitiv's expectations of $63.66 billion.
Berkshire also reported its operating income increased 20% to $7.02 billion as its wide range of businesses, which include insurance, transportation, utilities, retail and manufacturing, saw signs of recovery as the economy began to reopen.
Regarding its equity investments, the conglomerate registered solid gains, increasing by approximately $4.69 million during the quarter. Berkshire, however, told shareholders not to focus on quarterly fluctuations in investing gains and losses, noting that they are "usually meaningless" and "delivers figures for net earnings per share that can be extremely misleading."
Later this month, Buffett will release Berkshire Hathaway's equity portfolio for the first quarter.
As the deal-making environment has become more competitive and valuations have become lofty, Buffett has refrained from making any significant acquisitions, causing the conglomerate's cash pile to grow 5% during the quarter to more than $145.5 billion. This is just slightly below the record level recorded at the end of the third quarter of 2020.
During the 2021 annual shareholder meeting that was streamed online Saturday, the Berkshire CEO pointed out that the explosion in activity by special purpose acquisition companies will continue to make it difficult to find bargains.
"It's a killer. The SPACs generally have to spend their money in two years as I understand it. If you put a gun to my head to buy a business in two years, I'd buy one," Buffett said. "There's always pressure from private equity funds."
He also reassured investors that the trend will not last forever.
After seeing a record $24.7 billion in buybacks in 2020 as a result of not making any deals, the company bought back $6.6 billion worth of Berkshire shares during the quarter. During the meeting, Vice Chairman Charlie Munger (Trades, Portfolio) defended the program, saying it is beneficial for existing shareholders.
"If you're repurchasing stock just to bull it higher, it's deeply immoral," Munger said. "But if you're repurchasing stock because it's a fair thing to do in the interest of existing shareholders, it's a highly moral act, and the people that are criticizing it are bonkers."
On Monday, Class A shares of Berkshire Hathaway were up 1.94% at $420,516.63, while Class B shares rose 1.68% to $279.56. Year to date, both the Class A and Class B stock have climbed over 20%.
Disclosure: No positions.
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