Berkshire profit falls 24%, keeps Wells Fargo stake

Berkshire Hathaway’s third-quarter profit dropped 24 percent from a year earlier, when it recorded a large one-time gain, but acquisitions helped boost operating profit at the conglomerate run by billionaire Warren Buffett.
The company also reported a $22.1 billion stake in Wells Fargo & Co. as of Sept. 30, suggesting it kept its 10 percent ownership position even as the bank became embroiled in a scandal over its creation of unauthorized customer accounts.
Berkshire is Wells Fargo’s largest shareholder.
Quarterly net income for Omaha, Nebraska-based Berkshire fell to $7.2 billion, or $4,379 per Class A share, from $9.43 billion, or $5,737 per share, a year earlier.
Operating profit, which excludes investment and derivative gains and losses, rose 7 percent to $4.85 billion, or $2,951 per share, from $4.55 billion, or $2,769 per share.
That missed the average $3,058.10 per share forecast of analysts polled by Thomson Reuters I/B/E/S, in part reflecting weaker results at the Geico auto insurer and BNSF railroad, and falling demand from customers in industrial sectors.
Results included a $1.6 billion gain when Mars Inc. bought Berkshire’s preferred stock investment in its Wrigley chewing gum business. Last year’s results included a $4.4 billion gain related to the food company Kraft Heinz Co.
Revenue was nearly unchanged at $59.1 billion. Book value per share, Buffett’s preferred measure of growth, rose 2 percent from the end of June to $163,783.
Berkshire also ended September with $84.8 billion of cash, despite having completed a $32.1 billion purchase of aircraft parts maker Precision Castparts Corp. in January that was a key factor behind the boost in operating profit.
In a change, Buffett highlighted the cash hoard in Berkshire’s press release accompanying results.
“He has $85 billion of cash earning nothing,” said Steven Check, who invests $1.1 billion, of which 30 percent is in Berkshire, at Check Capital Management Inc. in Costa Mesa, California. 
“It gives Berkshire a lot of pent-up firepower for more acquisitions.”

WELLS FARGO
Since taking over Berkshire in 1965, Buffett has built a conglomerate with roughly 90 businesses including Brooks running shoes, Dairy Queen ice cream and Fruit of the Loom underwear.
Berkshire also owns dozens of companies’ stocks, including Apple Inc, Coca-Cola Co. and International Business Machines Corp. Though the value of the Wells Fargo investment fell from $23.7 billion at the end of June, the decline can be explained by the more than 6 percent drop in the bank’s share price.
That suggests that Berkshire has kept its roughly 500 million shares in the third-largest US bank.
Buffett has over the years repeatedly praised Wells Fargo, whose stock Berkshire has owned since 1989, and this year asked the US Federal Reserve for permission to buy more.

Source: Arab News