Profits jump at Buffett's company ahead of annual meeting

Warren Buffett's company said its first-quarter profits soared along with the paper value of its investment portfolio

Warren Buffett’s company said its first-quarter profits soared along with the paper value of its investment portfolio — giving the thousands of shareholders who will fill an arena Saturday to listen to the billionaire and several other top executives at the conglomerate answer questions for hours some good news to start the day.

“It’s a once in a lifetime opportunity,” said Chloe Lin, who traveled from Singapore to attend the meeting for the first time and learn from Buffett and his longtime investing partner Charlie Munger.

Berkshire’s shareholders meeting always attracts throngs of people who admire the two investors and want to hear whatever wisdom they have to offer about recent events and life lessons. And with both men in their 90s this year, some in the crowd feel the urgency to attend now while both men are still here.

“Charlie Munger is 99. I just wanted to see him in person. It’s on my bucket list,” Wu said. “I have to attend while I can.”

Berkshire Hathaway said Saturday morning that it made $35.5 billion, or $24,377 per Class A share, in the first quarter. That's more than 6 times last year's $5.58 billion, or $3,784 per share.

But Buffett has long cautioned that those bottom line figures can be misleading for Berkshire because the wide swings in the value of its investments — most of which it rarely sells — distort the profits. In this quarter, Berkshire sold only $1.7 billion of stocks while recording a $27.4 billion paper investment gain. Part of this year's investment gains included a $2.4 billion boost related to Berkshire's planned acquisition of the majority of the Pilot Travel Centers truck stop company's shares in January.

Buffett says Berkshire’s operating earnings that exclude investments are a better measure of the company’s performance. By that measure, Berkshire’s operating earnings grew nearly 13% to $8.065 billion, up from $7.16 billion a year ago.

The three analysts surveyed by FactSet expected Berkshire to report operating earnings of $5,370.91 per Class A share

This year’s first quarter was relatively quiet compared to a year ago when Buffett revealed that he had gone on a $51 billion spending spree at the start of last year, snapping up stocks like Occidental Petroleum, Chevron and HP. Buffett’s buying slowed through the rest of last year with the exception of a number of additional Occidental purchases.

At the end of this year's first quarter, Berkshire held $130.616 billion cash, up from $128.585 billion at the end of last year. But Berkshire did spend $4.4 billion during the quarter to repurchase its own shares.

The quarterly report didn’t reveal any big new stock investments this year. But most of Berkshire’s eclectic mix of companies performed well despite the fears about the possibility of a looming recession.

Berkshire's insurance unit, which includes Geico and a number of large reinsurers, recorded a $911 million operating profit, up from $167 million last year, driven by a rebound in Geico's results. Geico benefitted from charging higher premiums and a reduction in advertising spending and claims.

But Berkshire BNSF railroad and its large utility unit did report lower profits. BNSF earned $1.25 billion, down from $1.37 billion, as the number of shipments it handled dropped 10% after it lost a big customer and imports slowed at the West Coast ports. The utility division added $416 million, down from last year's $775 million.

Besides, those major businesses, Berkshire owns an eclectic assortment of dozens of other businesses, including a number of retail and manufacturing firms such as See's Candy and Precision Castparts.