Thursday, December 2News That Matters

Berkshire Hathaway Shows a Rebound From the Pandemic

Berkshire Hathaway, the conglomerate run by Warren E. Buffett, reported $11.7 billion in net earnings in the first quarter on Saturday, swinging to a profit from a $49.7 billion loss a year ago as the paper value of its investment gains soared.

Using Berkshire’s preferred financial metric, operating earnings, the company showed a nearly 19 percent year-on-year gain as its wide array of subsidiaries — from energy production to the Burlington Northern Santa Fe railroad to consumer brands — improved their performances.

The earnings report came hours before Berkshire held its annual investor meeting. Climate change, and Berkshire’s response to pandemic’s market swings in March 2020, were among the topics shareholders asked about on Saturday.

When one shareholder asked why Mr. Buffett had recommended a “no” vote to two proxy initiatives on climate change, he said it would be “asinine, frankly,” to do otherwise. He said that Berkshire had more than a million shareholders, and only three of them had bothered to write to him about their environmental concerns.

“Overwhelmingly, the people that bought Berkshire with their own money voted against those policies,” he said. “The votes for it were from people who never put a dime of their own money into Berkshire. And I don’t think they read our annual reports. I don’t think they read the reports of Berkshire Hathaway Energy.” If they had, he said, they would know that Berkshire was making strides in areas like high-voltage transmission and railroads.

“They’re nice people, but they want us to answer a bunch of questionnaires their way,” he said, adding that Berkshire would comply with any climate-change mandates the government imposed.

“We’ll do whatever is required,” he said.

When another shareholder asked why Berkshire had sold its airline stocks “on the low” last year when the government had announced it would not let such companies fail, Mr. Buffett said he agreed that providing emergency support to large companies “was a fine public policy” that he wished “could go to every restaurant and dry cleaner and every small business that really was out of business” last year.

“I do not consider” selling those stocks “a great moment in our history,” he added.

Berkshire’s annual investor meeting has for decades attracted Mr. Buffett’s faithful followers to the company’s hometown, Omaha, Neb., to celebrate one of the world’s best-known investors.

This year, however, it was again held virtually, bowing to pandemic travel and gathering restrictions. And for the first time, it was held not in Omaha, but in Los Angeles, where Charles T. Munger, Berkshire’s 97-year-old vice chairman, lives.

Berkshire’s annual meetings are known for offering a forum for the company’s shareholders to ask the 90-year-old Mr. Buffett anything on their minds.

The topics that were also expected to come up this year were perennial subjects like politics, potential takeover targets for Berkshire and who would succeed him as chief executive once he decided to step down. Questions about how to improve the conglomerate’s stock performance — it has trailed the S&P 500 over the past five years — were also expected to be raised.

Among Berkshire’s businesses that saw the biggest improvements in the first quarter was the railroad, which benefited from higher freight volumes as the American economy rebounded from the pandemic. Berkshire’s building products and consumer subsidiaries also posted higher sales, as housing construction and retail buying picked up.

Other parts of Mr. Buffett’s empire continued to show strain, however, particularly industrial manufacturers like Precision Castparts, whose aerospace parts were in lower demand because of the Covid-related drop in travel.

Berkshire’s vast insurance operations reflected a mixed picture. Auto insurance claims at Geico were down in the quarter, though other parts of the insurance business were hurt by increased claims tied to the destructive North American winter storm in February.

Berkshire reported $2.8 billion in investment gains during the quarter, compared with $54.5 billion in losses in the 2020 quarter.

The conglomerate also bought back $6.6 billion in stock during the quarter, as Mr. Buffett continues to spend his company’s enormous cash hoard — currently more than $145 billion — on repurchasing Berkshire shares rather than striking huge acquisitions.