Black and White Program

Warren Buffet delivers again

November 6th, 2012 by John Eastman

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Berkshire Hathaway Inc. disclosed that its profit climbed 72% in the third quarter as its holdings in derivatives helped boost its performance. Financial reports indicate that Net Income rose to $3.9 billion, up from $2.28 billion. Operating earnings were $2,057 a share. Berkshire has been busy making various acquisitions; some of which have helped contribute significantly to its bottom line. For instance, its purchase of the railroad company Burlington Northern Santa Fe, was completed in 2010 in a $26.5 billion transaction. The business contributed $937 million to earnings, compared with $766 million the year prior. Other acquisition activities include a newspaper in Waco, Texas, a building-insulation maker, a food distributor Meadowbrook Meat Company, and a recent disclosed purchase of retailer Oriental Trading Company for $500 million. Berkshire CEO Warren Buffet has bet early on the recovery of the U.S. Housing market by taking an investment position in Wells Fargo & Co., who is the largest U.S. home lender and bankrupt mortgage lender Residential Capital LLC. A positive indicator of that investment is that according to the S&P/Case-Shiller index of property values in 20 U.S. cities, prices for homes rose 2% in August from prior year. This is the biggest gain since July 2010. Additionally, the number of homes for sale in the U.S. dropped 18% in September from a prior year period, this according the National Association of Realtors website. On the cash front, the company increased its cash position to $47.8 billion from $40.7 billion in the most recent prior quarter.

A quick look at performance segments reveals that its insurance related businesses posted an underwriting profit of $392 million. This compares with $1.09 billion in a year earlier period. Underwriting profit at Geico car insurance increased to $435 million from $114 million. Separately the firms various holdings in its stock portfolio was valued at $88 billion on September 30th, up from $86.2 billion at the end of June. Significant positions include Wells Fargo up 3.3%, and IBM advanced 6.1%.

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