Warren Buffett’s Berkshire Hathaway Inc. reported a 23% decline in its quarterly operating profit, while rising prices in many stock holdings allowed the conglomerate to top its past full-year earnings.
Buffett explained Berkshire’s entry into stocks in his letter to the conglomerate’s shareholders. Berkshire’s last acquisition of stocks was four years ago, leaving the company sitting on $128 billion of cash.
Berkshire repurchased nearly $2.2 billion worth of stocks in the current quarter, totaling to $5 billion for the full year.
Berkshire’s fourth quarter operating profit dropped to $4.42 billion, or roughly $2,720 per class A share, from an initial $5.72 billion, or $3,484 per share.
The conglomerate chose not to write down its 26.6% stake in Kraft Heinz Co, which is in the process of recovering from years of cost-cutting. Kraft Heinz’s market value is below the $13.8 billion holding cost on the conglomerate’s balance sheet.
Net income amounted to $29.16 billion, compared to the $25.39 billion net loss year-on-year.
In 2019, the net income totaled $81.42 billion, smashing the $44.94 billion record in 2017, when the conglomerate gained from a lower US corporate tax rate.
Buffett wrote that companies with stocks owned by Berkshire are yielding remarkable returns “under any circumstances”, especially when compared to returns on bonds.
Berkshire’s stock lagged in 2019, gaining only 11% compared with a 31.5% rise in the Standard & Poor’s 500 with dividends, and reflecting the pull from the cash stake.