Berkshire Hathaway hit by derivatives losses in Q2

I scream, you scream, we all scream for ice-cream!

Warren Buffett’s ice-cream-to-insurance conglomerate Berkshire Hathaway reported a smaller profit for the second quarter on Friday as losses on derivatives dragged down results, though operating income set the new records Buffett predicted.

Buffett eschews derivatives for the most part, but he does have one outstanding (and large) derivative bet tied to stock market performance. While he has said repeatedly he expects that position to be profitable over time, it generated nearly $700 million in losses in the last quarter.

Berkshire said it had $3.1 billion in net income, or $1.25 per Class B share. That was down from last year’s second-quarter net income of $3.4 billion, or $1.38 per Class B share. Last year’s quarter was helped by a one-time gain of $1.25 billion. The results topped the $1.19 a share Wall Street was expecting. Berkshire's cash pile as of the end of the quarter ballooned to $40.66 billion, up more than $3 billion since the year began. Profit improved in Berkshire’s insurance units and business improved at its utility, railroad, manufacturing and retail businesses.

Buffett has said it is better to look at Berkshire earnings without the derivative losses and investment gains because investment and derivative gains or losses can be misleading because the company rarely sells its investments.

Berkshire Hathaway (BRK.A : NYSE : US$127998.00), Net Change: -481.00, % Change: -0.37%, Volume: 0,431

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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