Buffett conglomerate sees profit soar in third quarter

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Buffett conglomerate sees profit soar in third quarter

Warren Buffett’s Berkshire Hathaway said third-quarter profit climbed 29 percent on investments and gains at non-insurance businesses including railroad Burlington Northern Santa Fe.

Net income rose to $5.05 billion, or $3,074 a share, from $3.92 billion, or $2,373, a year earlier, the company based in Omaha, Nebraska, said yesterday. Operating earnings, which exclude some investment results, were $2,228 a share, missing the $2,403 average estimate of three analysts surveyed.

Berkshire’ subsidiaries haul freight, insure cars, generate electricity, make building supplies and sell consumer products from running shoes to diamond rings.

Acquisitions and investments have positioned Berkshire to be “an all-in bet on the U.S.,” said Bill Smead, chief executive officer of Smead Capital Management, which oversees about $680 million including shares of Buffett’s company. “There’s a lot of earnings leverage.”

Class B shares slipped 0.2 percent to $114.99 at 7:56 p.m. in New York after the results were released. They had rallied 29 percent this year through yesterday’s close, compared with the 24 percent advance in the Standard & Poor’s 500 Index.

Gains on investments, including bets on Goldman Sachs Group, General Electric and Wm. Wrigley Jr., added $1.86 billion to earnings before tax, compared with $917 million a year earlier. Berkshire posted a $427 million gain on derivatives in the quarter, compared with a $118 million loss a year earlier. Buffett, 83, uses the contracts to wager on stock markets and the creditworthiness of borrowers.

Buffett, Berkshire’s chairman and CEO, exchanged warrants in Goldman Sachs and GE after the quarter for common stock. Both deals stem from investments made during the 2008 financial crisis. Berkshire booked a profit of $680 million as Mars agreed to pay a premium to repurchase bonds that Buffett bought to help the candy company acquire Wrigley.

Bloomberg

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