Legendary investor Warren Buffett and his company Berkshire Hathaway are taking the age-old advice to “buy the dip,” reports an article in Bloomberg. In the second quarter of this year the conglomerate reported $3.8 billion in equity purchases, making it a net buyer that quarter; last year during the same period, it was a net seller.
As the S&P 500 lost 16% in the last quarter, Berkshire posted a profit of $9.2 billion, scooping up massive gains from its insurance and railroad businesses. But one downside was with Berkshire’s personal auto-insurance unit, Geico. Instead of the gains that Berkshire’s other insurance lines reported, it posted an underwriting loss of $487 million. Berkshire attributed Geico’s losses to a larger number of claims, mainly as a result of price increases for used-cars and shortages of auto parts. But although premiums increased, the number of active policies declined, signaling that Geico could be losing its market share value as consumers look for better deals with other providers. “It’s probably a good idea to watch for further deterioration,” Cathy Seifert of CFRA Research told Bloomberg.
Elsewhere in the report, Berkshire showed a net loss of $43.8 billion as a result of a $53 billion loss in their investment portfolio, but the company downplayed that loss as “a misleading picture” of their true performance. And Bloomberg Intelligence posits that Buffett isn’t “bearish on his own shares,” and that Berkshire’s position as a net buyer of equities will continue. Indeed, Berkshire’s stock buybacks declined by $2.2 billion from the start of this year through the second quarter, while income from its insurance investments were $1.91 billion. The company has barely made a dent in its enormous cash stockpile, dropping a fraction from $106 billion in the first quarter to $105.4 billion at the end of June.
While the report did not provide insight on whether Berkshire plans to acquire Occidental Petroleum after its aggressive share purchases, it did announce that Berkshire Hathaway Energy bought $870 million in common stock from Vice Chairman Greg Abel in June.