Berkshire Hathaway, the conglomerate helmed by legendary investor Warren Buffett, unveiled its fourth-quarter earnings report for 2023 on 24th February 2024, showcasing impressive financial milestones despite challenges in certain sectors.
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Here’s a breakdown of the key numbers and insights from Berkshire’s latest financial update:
Record Cash Reserves: Berkshire’s cash pile surged to a staggering $167.6 billion by the end of 2023, marking a new high for the company. This substantial cash reserve underscores Berkshire’s financial strength and its ability to seize investment opportunities when they arise.
Earnings Surge: Despite headwinds in its railroad and energy divisions, Berkshire reported a remarkable turnaround in earnings. Operating earnings for the fourth quarter of 2023 soared to $8.481 billion, a substantial 28% increase from the previous year. Full-year operating earnings also saw a notable uptick, reaching $37.350 billion, up 17% from the prior year.
Buffett’s Tribute to Charlie Munger: The earnings report carried sentimental significance as it marked the first quarterly update following the passing of Berkshire’s Vice Chair, Charlie Munger. Buffett paid homage to his long-time collaborator, dubbing him “The Architect of Berkshire Hathaway” in his shareholder letter.
Investment Strategy and Challenges: Buffett reiterated Berkshire’s aversion to issuing new shares and highlighted the scarcity of investment opportunities that meet the company’s stringent criteria. While Berkshire remains vigilant for potential investments, Buffett acknowledged the increasing difficulty in finding suitable candidates, both domestically and internationally.
Performance Across Business Segments:
Insurance Business: Berkshire’s insurance arm performed exceptionally well, achieving record sales, float, and underwriting profits. Geico, Buffett’s “favorite child” in the insurance portfolio, reported robust earnings driven by premium rate increases and favorable claims experience.
Railroads and Energy: Despite challenges in BNSF Railway and Berkshire Hathaway Energy, Buffett expressed optimism about the long-term prospects of these businesses. While BNSF Railway saw a decline in operating earnings, Buffett projected improved profit margins in the future, emphasizing the importance of railroads in America’s economic landscape.
Investment Gains and Losses: Berkshire’s investment portfolio experienced significant gains, contributing to overall profits. However, Buffett cautioned against overemphasizing investment fluctuations, emphasizing the importance of focusing on the performance of Berkshire’s operating businesses.
Share Repurchases and Financial Position:
Berkshire allocated $2.2 billion towards share repurchases in the fourth quarter of 2023, bringing the total for the year to approximately $9.2 billion. Additionally, Berkshire’s insurance float increased to approximately $169 billion by the end of 2023, reflecting the company’s continued financial stability.
Technical Analysis
Analyzing the Daily chart, Berkshire Hathaway Class A shares ( NYSE: BRK.A ) have demonstrated an uptrend since January 18, 2024, with the current price at 628930.18.
A trend line drawn from 543371.00 rejected the price at 590109.68 on February 13, 2024, before ascending to 632667.01 and retracing to the current price at 628930.18.
A break below the uptrend line suggests a potential downward movement, while surpassing the resistance at 632667.01 indicates a probable uptrend continuation.
Similarly, Berkshire Hathaway Class B shares ( NYSE: BRK.B ) have shown an uptrend since January 18, 2024, with the current price at 417.22.
A trend line drawn from 358.13 rejected the price at 392.08 on February 13, 2024, before rising to 420.88 and retracing to the current price at 417.22.
A break below the uptrend line may signal a downward trend, whereas surpassing the resistance at 420.88 suggests a likelihood of further upward movement.
In conclusion, Berkshire Hathaway’s robust financial performance in 2023, coupled with its substantial cash reserves and disciplined investment approach, reaffirms its position as a stalwart in the business world under the leadership of Warren Buffett. Despite challenges in certain sectors, Berkshire remains poised for long-term growth and value creation for its shareholders.
Sources:
https://www.berkshirehathaway.com/
https://finance.yahoo.com/news/berkshire-hathaway-inc-news-release-130000366.html
https://www.cnbc.com/amp/2024/02/24/berkshire-hathaway-brka-earnings-q4-2023.html
https://www.investopedia.com/berkshire-hathaway-fy2023-earnings-key-takeaways-8599175
https://www.thethings.com/warren-buffett-and-susan-thompson-open-marriage-details/
https://www.tradingview.com/chart/4IThf1h1/
https://www.tradingview.com/chart/4IThf1h1/
