Berkshire Hathaway’s Profit Fell in the Third Quarter

Overall, Berkshire said its businesses were affected by “ongoing global supply chain disruptions” as well as higher prices for raw materials. “While consumer demand for products remained high, earnings in the third quarter of 2021 were sequentially lower than the second quarter,” Berkshire wrote in its filing. “Several of our businesses experienced higher material, freight and other input costs attributable to ongoing disruptions in global supply chains.”

As expected, Berkshire’s results showed that it hadn’t made any significant acquisitions in the third quarter. Mr. Buffett has been under pressure to do something with his conglomerate’s growing cash reserves, which at the end of the third quarter had grown to just over $149 billion, higher than at any point in the company’s history. At Berkshire’s annual meeting earlier this year, Mr. Buffett said that a boom in the financing of special purpose acquisition companies, SPACS, had pushed up the price of potential deals. “Frankly, we’re not competitive with that,” Mr. Buffett said.

Berkshire’s largest investment in the quarter was in its own stock. Berkshire repurchased $7.6 billion of its own shares from the end of June to the end of September. That was on top of the $12.6 billion in shares that Berkshire bought in first half of the year.

The purchases reflect Mr. Buffett’s belief that Berkshires shares, which fell slightly in the third quarter, are undervalued. They are also at odds with what Mr. Buffett has previously said about stock repurchases. In the past, Mr. Buffett has called stock buybacks at times “immoral” as well as unfair considering that executives often know more about the dealings of their companies than outside shareholders. He has also said that buybacks can be the result of executives who are either naturally overconfident about the prospects of their own companies, or want to signal that they are confident.

Democrats, some of whom argue that companies have abused stock buybacks to avoid taxes or paying more to workers, have proposed taxing the buybacks to help pay for President Biden’s spending proposals. Earlier this week, Mr. Buffett’s longtime partner, Charlie Munger, told CNN that he thought politicians were misguided to punish companies for buying back their shares. “I think it’s insane,” said Mr. Munger, who describes himself as a Republican. “It is so irrational and I think it sort of destroys the whole system, once you start tinkering from Washington.

Article source: https://www.nytimes.com/2021/11/06/business/dealbook/berkshire-hathaway-earnings.html