In this segment from MarketFoolery, host Chris Hill and senior analyst Jason Moser discuss Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), which quietly reported its second-quarter earnings on Aug. 4. It was the kind of result that just builds the legend of Warren Buffett: All of the pieces of his multifaceted business empire are running like clockwork.
Its massive stock portfolio continues to churn out gains. The company repurchased a not-insignificant amount of Class A shares at the discretion of its leader. And he's still sitting tight on a $110 billion cash reserve, waiting for the right time to buy some big assets.
A full transcript follows the video.
This video was recorded on Aug. 6, 2018.
Chris Hill: Shares of Berkshire Hathaway up a little more than 3% this morning. As mentioned, they dropped their earnings release, second quarter profits, Friday afternoon after the market closed. Same quarter profits higher than expected. It looks like their insurance business is bouncing back.
Jason Moser: Yeah. It looks like everything is, as Ron might say, firing on all cylinders. I think the old saying goes, there's strength in numbers. That's one of Berkshire Hathaway's big strengths there -- it has a lot of numbers that make up what they're doing. We saw strength across the board in railroads, insurance, investments, even energy, which can be a little bit more volatile at times.
We saw, recently, they adjusted their repurchase strategy. For a while, it was, they would repurchase shares within that 20% premium to book value. They changed that to, basically, their own discretion, Warren and Charlie's discretion, with the input of those close to them. I think that makes sense. They're like, "Listen, rules? We don't need no stinking rules!" So, they're just going to buy back shares when they feel like it suits.
To that point, I did take a look at the 10-Qs here this quarter compared to last quarter, just to see what the share count looked like. It was notable, when you see A shares, which are the big $500,000 shares, that share count was actually down a little bit more than 13,000 shares from last quarter. B share count went up a little bit, actually. But, when you look at the math, the dollar volume in there, there was about $6.5 billion in that A share repurchase. That actually worked out for them. Again, you look at the strength of the business and its diversity of revenue streams, and let's not forget, a tremendous investment portfolio, a lot of different public companies that they have, and they're public companies that we like.
To that end, Chris, I have a little Market Foolery trivia today for our listeners, and anybody else who wants to participate -- Dan, you're in here too, if you want. What company does Berkshire Hathaway not own in its investment portfolio? We have Mac there behind the glass, this is very suiting for one of the companies I chose. I didn't know he was going to be here. We have: Visa, Sirius XM, PayPal, and Costco. One of those companies is not in Berkshire Hathaway's investment portfolio.
Hill: Dan, do you want to take the first whack at that?
Dan Boyd: Just one is not in?
Moser: One is not.
Boyd: Can I get them again really quick?
Moser: Visa, Sirius XM, PayPal, and Costco.
Boyd: I'm going with PayPal.
Hill: Mac, do you want to --
Moser: Mac's going Sirius XM, he's holding up a sticky note, Sirius XM. Well, I don't think we reveal the answer now. I think we let our listeners go to town and see what they think. Maybe we take some email or tweets, maybe we put a poll out there on Twitter. We can reveal the answer to you guys after we finish taping. [laughs]
Hill: email@example.com. We'll put that up on Twitter, as well. I'm going to guess Costco, just to mix it up. One more thing on Berkshire Hathaway, Buffett has said in the past that he likes to have a cash reserve of about $20 billion. I feel the same way in my personal life, by the way. They have $110 billion in cash right now. How badly do you think he's itching to buy something?
Moser: I think he's itching. But this really goes to speak to his ability to be patient. I think there are a lot of businesses out there that he would love to own, but only at the right price, and the market has just been on fire here for the last decade, really. I think there are a lot of businesses out there that he'd like to own [coughs] McCormick. We'll just see how that works out for him. It's nice to have that kind of reserve.