Buffett's Berkshire doubles profits, repurchases $ 900 million share in third quarter

NEW YORK (Reuters) – Berkshire Hathaway Inc. ( BRKa.N ), the conglomerate run by billionaire Warren Buffett, said Saturday's quarterly operating profit doubled when the insurance business dodged hurricanes and benefited from lower taxes.

The strong result gives Buffett more money to distribute, famous bargain hunting " value "investor has admitted to strive to find a place to put these earnings at work and used to buy back 928 million dollars in own company stock in the last quarter.

Operating profit in the third quarter doubled to $ 6.88 billion from $ 3.44 billion the year before, and higher than the $ 6.11 billion expected by Wall Street, according to IBES data from Refinitiv.

To help the company's insurance business were lower estimated liabilities from property and accident insurance in previous years and lower taxes. The year before included major losses due to three American hurricanes and an earthquake in Mexico.

The insurance guarantee was $ 441 million in the third quarter, compared to a loss of $ 1.4 billion in the previous year.

"This is certainly one of the largest quarterly earnings reports ever made by an American company," said Bill Smead, CEO of Smead Capital Management, a shareholder in Berkshire.

Berkshire said that net revenue in the third quarter increased more than 355 percent to $ 18.5 billion, but it reflected a new accounting rule requiring it to report unrealized investment gains on earnings. Buffett said that the rule could lead to wild and whimsical results and may mislead investors who should look at operating results instead.

Berkshire's effective tax rate for the third quarter was 19.2 percent compared to 25.3 percent in the previous year after a reduction in corporate taxation as President Donald Trump entered into law in December. Many US companies reported results have been affected by the impact of the Act.

OVER $ 100 BLEND TO SPEND

Insurance provides a flow of money that Berkshire can invest around the world. Float or insurance premiums collected before claims are paid and which help finance Berkshire's growth, ended September to $ 118 billion. The company has 103.6 billion dollars in cash, short-term government bonds and other similar investments.

Buffet's last major acquisition was in January 2016 when Berkshire paid $ 32.1 billion to the manufacturer Precision Castparts. In July, the company announced to abolish a policy that effectively prevented Buffett from buying back the company's shares at current prices.

Berkshire is based in Omaha, Nebraska, and has more than 90 companies in insurance, chemicals, energy, food and retail, industrial parts, rail and other sectors.

Their daily operations are supervised by Greg Abel and Ajit Jain, each set of investors as a possible successor to Buffett, 88, as CEO. Buffett and Deputy Chairman Charlie Munger, 94, handles major capital allocation decisions.

Berkshire's profits improved over each of its major business units. Their results paint a picture of a US economy that continues to grow, but is facing increased pressure from rising costs, partly due to the Trump administration's introduction of tariffs. In its construction products and McLane's grocery and foodservice businesses, for example, Berkshire reported higher fuel and commodity costs, which caused profits.

But in Burlington's Northern Santa Fe LLC, Berkshire's railroad business, they were able to increase prices as more companies escaped rail due to tight supply in the trucking market.

Berkshire warned that insurance loss due to Hurricane Michael currently is estimated to be in the range of $ 350 million to $ 550 million for the fourth quarter.

underpriced?

Berkshire A shares closed Friday at $ 308,411.01 per share, delivering a total return of 3.6 percent for the year, a little ahead of S & P 500's 3.4 percent return. And the company's book value per Class A share, reflecting assets minus liabilities and a preferred target for growth for Buffett, was $ 228,712 on September 30, higher than $ 217,667 a quarter ago.

Among his favorite investments, Buffett has recorded shares of Apple Inc. ( AAPL.O ). Berkshire's stake in Apple was worth $ 57.6 billion at the end of the last quarter, up from $ 47.2 billion at the end of June.

Apple shares fell almost 7 percent on Friday and reduced market value back to less than $ 1 trillion after it was forecasted softer than expected sales for the holiday quarter and driven nerves over iPhone sales by saying it would no longer release number.

Steven Check, president of Check Capital Management Inc., a Berkshire shareholder, said Berkshire's buyback was a good sign.

"It makes sense for me because stocks are traded on higher valuations for most of the quarter than where the stock was purchased," said Check.

"This confirms what we have known for a long time, which means that the stock has been underpriced."