What You Need To Know Ahead Of Berkshire Hathaway’s Earnings On Saturday

Berkshire Hathaway Inc. (BRK.A, BRK.B) will report fourth-quarter and full-year 2023 earnings on Feb. 24, 2024.

First Earnings Report Since Munger’s Passing

This will be Berkshire’s first earnings report since the passing of vice chairman Charlie Munger in November. Munger was CEO Warren Buffett’s longtime business partner.

Buffett wrote an entire section about Munger in the company’s 2022 annual report released last February, saying that “nothing beats having a great partner.” He also added quotes and lessons from Munger about investing and life, including:

• “The world is full of foolish gamblers, and they will not do as well as the patient investor.”
• “If you don’t care whether you are rational or not, you won’t work on it. Then you will stay irrational and get lousy results.”
• “A great company keeps working after you are not; a mediocre company won’t do that. “
• “Warren and I don’t focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time.”
• “There is no such thing as a 100% sure thing when investing. Thus, the use of leverage is dangerous. A string of wonderful numbers times zero will always equal zero. Don’t count on getting rich twice.
• “You don’t, however, need to own a lot of things in order to get rich.”
• “You have to keep learning if you want to become a great investor. When the world changes, you must change.”

2022’s Investment Losses Reversed?

For the full year 2022, Berkshire reported a $22.8 billion loss attributable to shareholders compared to an $89.8 billion income in the prior year. That was primarily because of $53.6 billion in investments and derivative losses for the year, even as operating earnings climbed by about 10% to $30.8 billion.

The Oracle of Omaha did lead his company to post profits in the first two quarters of 2023, but it swung to a loss for the three-months ending last October.

While there is no way to predict how different Berkshire’s earnings will look this year, the S&P 500 did gain over 24% last year versus a near 20% decline in 2022.

Another key metric that investors will be watching is Berkshire’s cash pile. Rising Treasury yields boosted the company’s cash hoard to a record $157.2 billion in the third quarter.

With yields trending lower in the final three months of last year, it will be interesting to see how they affected Berkshire’s portfolio given Buffett’s own admission that “Berkshire will always hold a boatload of cash and U.S. Treasury bills along with a wide array of businesses.”

Investors will also be looking to Buffett for commentary about the company’s acquisitions, share buybacks by listed companies or even federal taxes.

Will Berkshire’s Mystery Stock Pick Be Revealed?

Berkshire’s upcoming earnings report may or may not include information about the company’s mystery stock acquisition in the third quarter of 2023. The company aksed the U.S. Securities and Exchange Commission (SEC) to keep the investment confidential from public filings.

After an analysis of Berkshire’s other regulatory filings showed that the company’s cost basis for financials had increased by $1.2 billion in the third quarter, Barron’s hypothesized the increase could be on account of the new stock investment since Berkshire did not add to its existing financial sector investments for the period.

Berkshire’s most recent 13-F filing said it sold off about $2 billion in Apple (AAPL) shares and a substantial portion of its positions in HP (HPQ) and Paramount Global (PARA), among other portfolio changes.

Eyes On The Insurance Businesses

Investors may also want to watch for the impact on Berkshire’s insurance business of rampant cost increases across the industry in the last year. In August last year, auto insurance costs surged over 19%, at the fastest pace since 1976, driven by pricier cars and rising costs of fixing them. Frequent natural disasters have pushed premiums for home insurance up as well.

Many insurance companies responded by scaling back operations in specific states. For example, AmGUARD Insurance Company, a Berkshire subsidiary, stopped offering Homeowners and Personal Umbrella insurance policies to customers in California starting August, with policies expiring on or after November not renewing.