Berkshire’s operating earnings surge as Buffett repurchases record $27 billion in stock during 2021

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Berkshire Hathaway Chairman and CEO Warren Buffett.
Andrew Harnik | AP

Berkshire Hathaway‘s operating profits surged in the fourth quarter and for the full year as the conglomerate’s businesses continued to roar back to life from the pandemic economic slowdown. Chairman Warren Buffett increased his bet on that comeback, buying back a record amount of Berkshire shares in 2021.

The company’s operating earnings — which encompass profits made from the myriad of businesses owned by the conglomerate like insurance, railroads and utilities — totaled $7.285 billion in the fourth quarter of 2021, according to a company release posted Saturday. That’s up roughly 45% from the year-earlier period’s profit of $5.021 billion.

For the year, Berkshire’s operating earnings totaled $27.455 billion. That’s up 25.2% from 2020’s $21.992 billion.

Berkshire used $6.9 billion to buy back shares in the fourth quarter, bringing the total in share repurchases to approximately $27 billion for 2021. That’s a record amount and up from the $24.7 billion repurchased as the pandemic raged in 2020. However, the fourth-quarter buyback pace was a bit slower than the $7.6 billion repurchased in the third quarter.

Despite these aggressive buybacks, Berkshire’s cash hoard at the end of 2021 stood at about $146.72 billion. That’s down only slightly from a record $149.2 billion at the end of the third quarter.

Buffett explained in his accompanying annual shareholder letter that he and Vice Chairman Charlie Munger found little that “excites” them in terms of big acquisitions that was once their hallmark. Instead, the pair increasingly finds share repurchases as the best way to deploy cash at this time.

“Through that simple act, we increase your share of the many controlled and non-controlled businesses Berkshire owns,” Buffett wrote in the letter. “When the price/value equation is right, this path is the easiest and most certain way for us to increase your wealth.”

Overall earnings, which reflect Berkshire’s fluctuating equity investments, came in at $39.646 billion for the quarter. That’s up about 10% from the year-earlier period of $35.835 billion.

However, Berkshire tends to downplay the importance quarterly changes in the company’s investment gains or losses.

“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said.

Earnings from Berkshire’s railroad, utilities and energy business jumped 12.3% to $2.241 billion from $1.995 billion a year earlier. Meanwhile, Berkshire’s insurance-underwriting business earned $372 million after losing $299 million in the fourth quarter of 2020.

The earnings report came as Berkshire’s B shares broke out to a record high this year, up nearly 7%.

Full-year overall earnings came in at $89.795 billion, more than double 2020’s total of $42.521 billion.

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