Berkshire Hathaway Chairman and CEO Warren Buffett.
Andrew Harnick | AP
Berkshire Hathaway’s operating profit rose in the fourth quarter and for the full year as the group’s businesses continued to roar back to life from the pandemic economic downturn. Chairman Warren Buffett raised his bet on that return by buying back a record amount of Berkshire shares in 2021.
The company’s operating income — which includes the benefits of a myriad of group-owned businesses such as insurance, railroads and utilities — totaled $7.285 billion in the fourth quarter of 2021, according to the company’s release on Saturday. That’s up about 45% from the year-ago period’s profit of $5.021 billion.
For the year, Berkshire’s operating income totaled $27.455 billion. This is a 25.2% increase from 2020’s $21.992 billion.
Berkshire used $6.9 billion to buy back shares in the fourth quarter, bringing the total share repurchases for 2021 to about $27 billion. That’s a record amount and $24.7 billion was repurchased in 2020 as a pandemic. However, the pace of fourth quarter buybacks was slightly slower than the $7.6 billion repurchases in the third quarter.
Despite these aggressive buybacks, Berkshire’s cash hoard stood at about $146.72 billion at the end of 2021. That’s just down from the record $149.2 billion at the end of the third quarter.
Buffett explained in his annual shareholder letter that he and Vice Chairman Charlie Munger found little to “excite” him in the face of the major acquisitions that were once his hallmark. Instead, the pair increasingly finds share repurchases as the best way to deploy cash at the moment.
“Through that simple act, we increase your share in the many controlled and non-controlled businesses owned by Berkshire,” Buffett wrote in the letter. “When the value/value equation is right, this path is the easiest and most surefire way for us to grow your wealth.”
Total income, which reflects Berkshire’s volatile equity investments, came in at $39.646 billion for the quarter. That’s up about 10% from the year-ago period of $35.835 billion.
However, Berkshire underestimates the importance of quarterly changes in the company’s investment profits or losses.
Berkshire said, “The amount of investment gains/losses in any given quarter is usually meaningless and provides net earnings per share figures that can be extremely misleading for investors who have little or no knowledge of accounting rules.” Not there.”
Income from Berkshire’s railroads, utilities and energy business rose 12.3% to $2.241 billion from $1.995 billion a year ago. Meanwhile, Berkshire’s insurance-underwriting business earned $372 million in the fourth quarter of 2020 after posting a loss of $299 million.
The earnings report came as Berkshire’s B shares hit a record high of nearly 7% this year.
Full-year total earnings stood at $89.795 billion, more than double the 2020 total of $42.521 billion.