ii view: Would you bet against Warren Buffett?

Airline stocks aided a near-$50 billion loss in Q1, but Berkshire Hathaway's cash pile keeps growing. 

First-quarter results

• Loss attributable to shareholders of $49.7 billion 
• Operating earnings rose 5.7% to $5.87 billion
• Cash of $137 billion

ii round-up:

Hit by the coronavirus, Warren Buffett-run conglomerate Berkshire Hathaway (NYSE:BRK.B) posted a loss of nearly $50 billion in these latest quarterly results.

Most of Berkshire's 90-plus businesses suffered some hit from the Covid-19 outbreak. Revenues had slowed considerably in April. 

Berkshire shares are down by nearly 20% year-to-date having gained by just under 11% in 2019 – underperforming a gain of nearly 29% for the S&P 500 index.

Sales for its entire holdings in investments of the four main US airlines, including American (NASDAQ:AAL) and Delta (NYSE:DAL) - rivals of UK major IAG (LSE:IAG) - contributed to the quarterly investment loss.  

Gains in its investments of companies such as Apple (NASDAQ:AAPL) and JP Morgan (NYSE:JPM) had helped its full-year 2019 profit hit $81.4 billion.

First-quarter earnings, when stripping out investment gains or losses, Mr Buffett’s preferred view of performance, rose by just under 6% to $5.87 billion. Losses for its railroad, utilities and energy businesses were more than offset by gains in insurance related business. 

The ongoing lack of a value enhancing major acquisition meant that group cash rose further to $137 billion - up from $128 billion year-end 2019.  

ii view:

Led by legendary investor and businessman Warren Buffett, Berkshire Hathaway is tracked and invested in by large and small investors alike. A conglomerate of different businesses and investments acquired under the watchful eye of Mr Buffett, Berkshire as an American company offers investors a near one-stop investment destination.  

At the moment, the company’s cash balance remains a core focus. A sum of $137 billion could see Berkshire making a major acquisition. It could also provide for significant shareholder returns.

But an 18% underperformance compared to the S&P 500 index over 2019 may suggest that investors are growing impatient with the company’s inability to find a home to invest its cash mountain, despite repurchasing $5 billion of its own stock in 2019. Mr Buffett turning 90 later this year is also raising questions regarding management succession plans. 

Positives: 

• Diverse portfolio of industries and businesses
• Company Chairman Warren Buffett is regarded by many as a legendary investor and businessman 

Negatives:

• Subject to macro-economic and geopolitical uncertainties
• Management succession risk – who might replace current Chairman Warren Buffett

The average rating of stock market analysts:

Buy