Berkshire Hathaway Helped By Derivatives Gains Of $1.53 Billion

Buffett Spit-Shines Berkshire Earnings (BRK-A, BRK-B, COP, GS)

Berkshire Hathaway Inc. (BRK-A, BRK-B) has just released earnings for its second quarter.  Warren Buffett and friends reported earnings of some $3.3 billion, or $2,123.00 EPS, and revenues were $29.6 billion. Non-GAAP earnings not including gains were $1,147.00 EPS.  Thomson Reuters had a figure of $1,238.00 for the “A” shares, but we’d make note that this is based on a handful of estimates.

During the second quarter of 2009, the company’s book value increased to $73,806 per Class A equivalent share, an increase of 4.6% from year end and 11.4% from the end of the first quarter. In addition, to its  net worth of $114.5 billion, insurance float (the net funds held pursuant to insurance contracts that we can be invested for Berkshire’s benefit) increased from year end by about $3 billion to approximately $61 billion at June 30, 2009.

Berkshire benefited from gains on its derivatives portfolio of $1.53 billion.

Buffett was being sharply criticized earlier this year for falling off the performance rocker, but shares have done well.  They are up over 50% off of the 52-week lows.  Buffett shares fell to $90,100.00 the trading day after his last earnings report in May.  The stock is up right at 20% since then.

Buffett had already tried to tone down expectations when he was calling for a second stimulus package, and we think he was talking down his economically sensitive operating earnings from his wholly owned subsidiary acquisitions.

But Buffett had an amazing quarter.  As we noted a week ago, many of his top non-financial holdings have doubled and more from the lows.

ConocoPhillips (NYSE: COP) was noted last quarter as being a source of funds used to lock in losses.

Berkshire’s insurance operations have been believed to be crimped by investment losses and there is still an issue with some of the derivatives exposure that many feel had gotten too high.

Buffett’s bet in Goldman Sachs Group Inc. (NYSE: GS) was criticized for a while when the financial firms were on the ropes, but Buffett is getting the last laugh now with the 10% rate and then with the warrants.

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JON C. OGG
AUGUST 7, 2009