The operating profit of the American conglomerate Berkshire Hathaway exceeded projections as results were released for the third quarter. The corporation run by the billionaire Warren Buffet posted a quarterly return that supersedes what analyst proposed in the third quarter of 2019.
In its quarterly earnings reports released over the weekend, the company revealed a better-than-expected operating profit of US$7.86 billion during the third quarter alone. And within Berkshire Hathaway’s core insurance business, the company reported that insurance float, as of September 30, was approximately US$127 billion – an increase of US$4 billion since year-end 2018.
Helping the company’s massive insurance operations were lower estimated liabilities from property and casualty insurance in prior years and lower taxes. During the period last year, the company experienced major losses due to three U.S. hurricanes and an earthquake in Mexico.
Last year, operating profits doubled, rising to US$ 6.88 billion from US$ 4.11 billion a year earlier, way ahead of the US$ 6.11 billion predicted by the Wall Street. Trends show that the company’s growth keeps exceeding expectations
Investors expecting ‘elephant-sized acquisition’
The Berkshire Hathaway Inc. has gone for a near four-year stint without a major acquisition, leading to what is termed as ‘cash hoarding’ by stakeholders and analysts
Warren Buffett as the Chief Executive Officer of the conglomerate holding large investments in major industries including transportation, banking, insurance, and food complained in his annual letter to shareholders earlier in the year about the challenge of finding suitable acquisition targets that are also reasonably priced.
“Prices are sky-high for businesses possessing decent long-term prospects,” wrote Buffett. “That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities. We continue, nevertheless, to hope for an elephant-sized acquisition.”.
The company increased its cash hoard to US$128.2 billion due to the inability of its management to find a suitable acquisition that is large enough and will ensure a guaranteed return on investment to its shareholders this is caused in part by the increasing stock prices which are impeding Buffet’s effort to find an investment that is reasonable enough.
An equity analyst at CFRA Research in New York, Cathy Seifert said last weekend after the third-quarter results were released that there is a growing frustration among investors that the cash hoard is not being effectively deployed, she also added that “The flip side is that Berkshire’s stock tends to do well when the economy softens.”
Berkshire ended September with a record $128.2 billion of cash, despite repurchasing $700 million of stock in the quarter.