By Justin Baer
Warren Buffett's Berkshire Hathaway Inc. swung to a quarterly profit on stock-market gains and better results from its insurance business.
Berkshire reported first-quarter net income of $11.7 billion, or $7,638 per Class A share equivalent, compared with a loss of $49.7 billion, or $30,653 per Class A share equivalent, in the year-earlier period.
Operating earnings, which exclude some investment results, rose to $7.02 billion from $5.87 billion in the year prior.
The conglomerate runs a large insurance operation as well as railroad, utilities, industrial manufacturers, retailers and even auto dealerships. It also holds large investments, especially in the stock market. An accounting rule change in recent years has meant that Berkshire's earnings often reflect the larger performance of the stock market, while operating earnings more accurately reflect the firm's vast business operations.
Berkshire's insurance-underwriting business had operating earnings of $764 million in the first quarter, up from $363 million a year ago. Insurance-investment income slipped to $1.21 billion, from $1.39 billion.
The company's railroad, utilities and energy units earned $1.95 billion, up from $1.75 billion.
The U.S. stock market rose during the first quarter, buoyed by progress on the rollout of the coronavirus vaccines and expectations for a powerful recovery in the nation's economy. Investors rotated into beaten-down sectors like finance and energy and out of technology stocks. And legions of individual investors plowed into so-called meme stocks such as GameStop Corp. , spurring an unusual rally in those shares that ended abruptly in early February.
The major stock indexes closed the period near record highs. The S&P 500 climbed 5.8% in the quarter, while the Dow Jones Industrial Average rose 7.8%.
The markets were a far different place a year earlier, when fears over the virus's spread gripped Wall Street and locked down parts of the economy. Government officials raced to intervene, steadying investors' nerves with a series of programs that unclogged markets. By May, stocks were rallying again.
Mr. Buffett, who made some of the most-successful deals of his unparalleled career in turbulent times, largely sat out the early days of the pandemic. Berkshire's biggest deal last year came in July, when the company agreed to buy Dominion Energy's midstream energy business for $9.7 billion, including debt.
Berkshire was a big buyer of its own stock last year and spent some $6.6 billion on share repurchases during the first quarter.
The company sold more stocks than it bought during the first quarter, gaining $6.45 billion on sales and spending $2.57 billion on purchases, according to a securities filing.
The 90-year-old Mr. Buffett, whose shrewd investments have earned him the nickname "the Oracle of Omaha," has continued to stockpile cash for acquisitions. Berkshire held some $145.4 billion in cash at the end of the first quarter, up from about $138.3 billion at the end of 2020.
Berkshire's Class A shares fell $4,300 to $412,500 on Friday. They have gained 20% so far this year.
One of Wall Street's most enduring successes, Berkshire produced annualized gains of 20% from 1965 to 2020, outperforming the S&P 500's 10.2% gains, including dividends. In recent years, Berkshire's performance has dipped. The company's total returns over the past five years were 14%, compared with 18% for the S&P 500.
The slump has made Berkshire an easier target for money managers seeking governance changes at the company. While shareholder proposals urging disclosures on climate change and staff diversity are expected to fail this year, institutional investors' calls for changes may grow louder in the years to come.
Berkshire will hold its annual meeting for shareholders later Saturday.
Write to Justin Baer at email@example.com
(END) Dow Jones Newswires