Berkshire's Earnings Soar with 111% Net Profit Surge! Abel Takes Charge, Shifts from 'Net Seller' to 'Net Buyer'

Berkshire Hathaway (BRK.A-US, BRK.B-US) released its latest financial results on Saturday (August 8), reporting a 111% year-on-year increase in net profit. Driven by a significant rebound in unrealized gains from its stock investment portfolio, the company's after-tax net income reached $25.667 billion in the second quarter, more than doubling from $12.370 billion in the same period last year. For the first half of the year, cumulative net profit totaled $35.773 billion, representing a year-on-year growth of approximately 111%. This performance highlights how Greg Abel, who has taken over as CEO, is beginning to demonstrate a different pace of capital allocation compared to the Warren Buffett era.

The surge in profits was primarily driven by investment gains. Berkshire's after-tax investment income in Q2 reached $12.684 billion, including approximately $10.9 billion in unrealized gains from its stock holdings and about $1.8 billion in realized gains.

In contrast, the same quarter last year was heavily weighed down by a $3.76 billion impairment charge related to its investment in Kraft Heinz (KHC-US).

Notably, although the book value of Kraft Heinz shares still exceeds the market price by over 10%, Berkshire's management assessed that the threshold for impairment had not been triggered, so no additional loss was recognized this quarter.

Excluding the volatility of investment gains, the company's core operating profit also showed steady growth, reaching $12.983 billion in Q2, a year-on-year increase of about 16%. First-half operating profit totaled $24.329 billion, up approximately 17% year-on-year.

Breaking down by business segment, the Manufacturing, Service & Retail division performed the strongest, contributing $4.470 billion in a single quarter, a 24% year-on-year increase. Railroad subsidiary BNSF contributed $1.558 billion, up about 6% year-on-year, while the energy business delivered $891 million, growing over 27%.

In contrast to the robust performance of physical operations, Berkshire's traditionally core insurance business showed signs of cooling. Insurance underwriting profit declined to $1.731 billion, and insurance investment income decreased by nearly 10% compared to the same period last year.

However, benefiting from foreign exchange gains on U.S. dollar-denominated debt turning from loss to profit, the 'Other' category unexpectedly contributed $1.274 billion in profit, becoming a major highlight of the quarter's financials.

The most notable aspect of the earnings report was Berkshire's rare shift from being a 'net seller' to a 'net buyer' of stocks.

In Q2, the company made net stock purchases of approximately $19.8 billion, including a $10 billion investment to establish a position in Alphabet (GOOGL-US) common stock, propelling Google into Berkshire's top five holdings and replacing Chevron (CVX-US).

Alongside Apple (AAPL-US), American Express (AXP-US), Bank of America (BAC-US), and Coca-Cola (KO-US), these five major holdings now collectively account for 66% of the entire stock investment portfolio.

Interestingly, this major investment coincided closely with Abel personally leading and assisting Alphabet in finalizing an $85 billion financing deal, indicating the new CEO's swift and decisive approach to large-scale transactions.

Looking at the first half as a whole, Berkshire purchased $39.405 billion worth of stocks and sold $27.780 billion, resulting in a net purchase of approximately $11.625 billion. In contrast, the same period last year saw a net sale of about $4.5 billion.

Analysts note this signifies that Berkshire has officially moved away from its conservative stance of the past several years—continuously reducing stock holdings and hoarding cash—and has now turned toward aggressive positioning in the public markets.

As of the end of June, the fair value of Berkshire's equity investments reached $323.779 billion, an increase of $26 billion from the beginning of the year, with unrealized gains totaling $217.258 billion.

In addition to increasing stock investments, Berkshire also spent $4.527 billion on share buybacks in Q2, marking the largest quarterly amount since 2021 and far exceeding the $235 million spent in Q1. The total buyback amount for the first half was approximately $4.76 billion.

Examining the monthly rhythm, Berkshire made almost no moves in April, began modestly in May, and significantly accelerated in June, repurchasing over 7.14 million Class B shares (average price of about $487.98) and 413 Class A shares (average price of about $733,800) in that single month.

Earlier this year, Abel stated that the company restarted its treasury stock program because management judged that the 'intrinsic value' of Berkshire's stock had surpassed its market trading price.

While aggressively increasing stock investments and buybacks, Berkshire's cash reserves have declined. As of June 30, cash holdings dropped to $365.5 billion.

Beyond market activities, Berkshire completed two major physical acquisitions in the first half: in early January, it acquired OxyChem, the chemical business of Occidental Petroleum, for approximately $9.4 billion, which began contributing about $1.4 billion in revenue in Q2; in late July, Berkshire acquired U.S. homebuilder Taylor Morrison for approximately $6.8 billion in cash at $72.50 per share.

Analysts point out that acquiring a homebuilder during a period of high interest rates suppressing housing demand reflects Abel's confidence in the long-term outlook for U.S. housing demand.

In total, these two acquisitions used approximately $16.2 billion in cash, combined with $11.6 billion in net stock purchases and $4.8 billion in share buybacks. Under Abel's leadership, Berkshire's pace of capital allocation is clearly accelerating compared to the past.