Berkshire has robust quarter

Berkshire Hathaway Inc. on Friday reported robust second-quarter earnings, primarily on the strength of its derivative investments and rebounding stock prices.

The results, reported after the market closed, reversed a first-quarter loss that was the first since terrorist attacks of 2001.

Analysts had expected a positive report, and Class “A” shares closed at $108,100 Friday, up $1,150, or 1.1 percent.

Berkshire reported net income of $3.3 billion, or $2,123 per share. That compares with a profit of $2.88 billion posted during the same period last year.

The results beat predictions of three analysts, surveyed by Thomson Reuters, who on average expected Berkshire to report earnings per share of $1,238.38, according to the Associated Press.

Berkshire owns more than 60 subsidiaries and has major investments in companies such as Coca-Cola and Wells Fargo.

The recession had weighed on Berkshire, contributing to a loss in the first quarter of the year. That changed in the second quarter, however.

Derivative holdings added $2.36 billion to the company's earnings, compared with $689 million during the same quarter in 2008. The improved earnings from derivatives, which have been controversial investments, solidified CEO Warren Buffett's contention that they would make money for the company over the long term.

Berkshire's derivatives are insurance-like contracts for which it receives up-front premiums in return for pledges to pay potential losses over 10 or 20 years. The company is required to set values on those derivatives regularly.

The company's preferred shares and debt in Goldman Sachs Group Inc. and General Electric Co. significantly increased in value.

The company said it reduced purchases of common shares in favor of preferred shares of Goldman Sachs, GE, municipal bonds and debt in firms including luxury jeweler Tiffany & Co. and motorcycle maker Harley-Davidson Inc.

Investment income increased 9 percent to $1.87 billion at Berkshire's insurance and finance operations.

Stocks of other companies in the Berkshire portfolio also gained in value. They included American Express Co., up 71 percent; Wells Fargo, up 70 percent; and Burlington Northern Santa Fe Corp., up 22 percent.

The company's “book value” — Buffett's preferred measuring stick — increased to $118.8 billion, a jump of 11 percent from last quarter. Book value is assets minus liabilities.

The price of Berkshire A stock went above the $100,000 mark this week after plummeting to a six-year low in March.

Also this week, Buffett, 78, appointed David Sokol of Omaha, chairman of the Mid- American Energy Holdings Co. business, to run NetJets Inc. on an interim basis. The announcement added to speculation that he is Buffett's choice to eventually run Berkshire Hathaway.

This report includes material from the Associated Press and Bloomberg News.

Contact the writer:

444-1414, ross.boettcher@owh.com