October is in the books -- with stocks posting a monthly return of 4.4%, no less -- and November is off to a good start. Following two days of losses, the S&P 500, and the narrower price-weighted Dow Jones Industrial Average (DJINDICES:^DJI), gained 0.29% and 0.45%, respectively, on Friday.
Berkshire Hathaway (NYSE:BRK.B), the candy-to-utility conglomerate led by billionaire investor Warren Buffett, reported its third-quarter results after Friday's market close. The verdict? Good numbers, but not spectacular; Berkshire's B shares were down a quarter of percent in the after-hours session.
Berkshire beat expectations on the top line, with revenues of $46.54 billion against a forecast of $44.5 billion. Net income rose 29%. to $5.05 billion, or $3,074 per A share, but that figure was bolstered by $1.39 billion in investment and derivative gains, up from $521 million in the year-ago period.
Berkshire's operating earnings rose 8% year on year, to $3.66 billion, equivalent to $2,228 per A share; however, that fell short of analysts' expectations for $2,402 per A share. Operating earnings do not include investment and derivative gains and are, therefore, a better measure of the performance of Berkshire's business -- as stated clearly by management in the quarterly report:
We believe that realized investment gains/losses and other-than-temporary impairment losses are often meaningless in terms of understanding our reported results or evaluating our economic performance.
Operating earnings rose across all businesses relative to the prior-year quarter, except for insurance underwriting, which was dogged by significant losses and loss-adjustment expenses at GEICO, and catastrophe losses due to a hail storm in Europe.
Although Warren Buffett did not add any "elephants" to Berkshire's stable of operating businesses during the quarter, one of Berkshire's subsidiaries, did complete a relatively sizable, yet low-profile "tuck-in" acquisition. The target was Meadowbrook Meat Company, "a large customized foodservice distributor for national restaurant chains with annual revenues of approximately $6 billion."
That still left Berkshire with $35.3 billion in cash and cash equivalents on its balance sheet at the end of the quarter. Given that Mr. Buffett wishes to keep a minimum of $20 billion in cash for liquidity purposes, that still leaves a good bit of change to play with. Shoulder your elephant gun, Mr. Buffett -- shareholders are impatiently awaiting your next trophy!