Warren Buffett’s Berkshire recorded a record operating profit by cashing out its huge stake in Apple.
Buffett’s company also posted record operating profits exceeding $11 billion as its insurance operations benefited from improved underwriting and higher investment returns as interest rates rose.
The value of Berkshire’s Apple stake fell 22% from $174.3 billion at the end of 2023 to $135.4 billion as of March 31. That’s despite the iPhone maker’s stock falling just 11% in the quarter.
According to Apple’s stock price movements, Berkshire appears to have sold 13% of its shares in the quarter, selling approximately 790 million shares.
The massive sale is a reversal for Buffett, who is generally technophobic but has come to view Apple as a consumer products company with strong pricing power and a devoted customer base. But some investors have expressed concern that Apple has spent too much of Berkshire’s stock. But the sale leaves Buffett with more than six times the cash buffer of at least $30 billion he promised to maintain. Berkshire realized after-tax gains of $11.2 billion on investment sales in the quarter.increase profits
First quarter operating profit was $11.22 billion, up 39% from $8.07 billion in the same period last year. This is approximately $7,807 per Class A share.
Net income fell 64% to $12.7 billion, or $8,838 per share, compared with $35.5 billion a year ago, when Berkshire had huge unrealized profits on its stocks.
Accounting rules require Berkshire to report these profits along with its financial results. Buffett urges investors to ignore the volatility this causes.
Berkshire also repurchased $2.6 billion worth of stock in the first quarter and a smaller amount in the first three weeks of April.
The results were announced ahead of Berkshire’s annual shareholder meeting in Omaha, part of a weekend that draws tens of thousands of people to the city.
Buffett, 93, has led Berkshire since 1965 and transformed it from a struggling textile company into a conglomerate with dozens of businesses, including Geico, BNSF Railroad, Berkshire Hathaway Energy, Dairy Queen and See’s Candies.
Diversification has led many investors, not just Buffett fans, to view Berkshire as a stable long-term investment even amid recession fears and concerns about the banking industry.
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Underwriting profits rose 80% to $5.2 billion. This included more than doubling Geico’s underwriting profits, which benefited from rate increases and a large reduction in the percentage of premiums used to pay for accident losses.
BNSF Railroad’s profits fell 8%, due in part to lower fuel surcharges and an “unfavorable business mix.”
Berkshire Hathaway Energy saw its profits rise 72% as improved operating performance in its utilities segment helped offset rising legal costs for its HomeServices of America real estate brokerage related to a nationwide settlement over brokerage commissions.
The energy business still faces billions of dollars in claims against its PacifiCorp division over the 2020 Oregon wildfires.
