The company reported a giant loss because of a huge drop in the paper value of its investments, though it is still sitting on a big pile of cash.
Warren Buffett’s company reported a nearly $50 billion loss on Saturday because of a huge drop in the paper value of its investments, though it is still sitting on a big pile of cash.
Berkshire Hathaway Inc. said it lost $49.7 billion, or $30,653 per Class A share, during the first quarter. That’s down from last year’s profit of $21.66 billion, or $13,209 per Class A share.
An accounting rule requires Berkshire to report unrealized stock losses and gains with earnings. This causes huge swings in Berkshire’s net results that Buffett considers meaningless.
Nonetheless, Berkshire has loaded up on stocks in part because of Buffett’s inability to find large companies to buy outright, a drought that has lasted more than four years and left Berkshire with about $137.3 billion of cash.
The Standard & Poor’s 500 slid 20% in the first quarter but there were steeper falls in several large Berkshire holdings including American Express, Bank of America, Wells Fargo and four airlines — American, Delta, Southwest and United.
“As efforts to contain the spread of the COVID-19 pandemic accelerated in the second half of March and continued through April, most of our businesses were negatively affected, with the effects to date ranging from relatively minor to severe,” Berkshire said in the filing.
And the company added “several of our retailing businesses and certain manufacturing and service businesses are being severely impacted due to closures of facilities where crowds can gather, such as retail stores, restaurants, and entertainment venues.”
As a result of the massive shift in consumer behavior, Berkshire said that various subsidiaries have had to furlough employees, cut hourly wages and salaries and reduce capital spending plans in order to preserve capital.
Berkshire is sitting on a pile of more than $137 billion cash because Buffett has struggled to find major acquisitions for the company recently.
On Saturday afternoon, Buffett plans to lead an abbreviated online version of Berkshire’s annual meeting without any of the roughly 40,000 shareholders who typically attend.
The company shifted to an online meeting and cancelled all the events surrounding the meeting because of the coronavirus outbreak.