Strong earnings, but even more cash to burden Buffett
| Berkshire's third quarter: even more cash Berkshire Hathaway released its third quarter earnings news release this morning along with its 10-Q SEC report. (As always, the news release urges everyone to read the 10-Q because the news release doesn't have enough information to make "an informed investment judgment.")
Third quarter operating income, (the money generated by Berkshire's subsidiaries, not its stocks), increased 14% to $7.86 billion compared to last year's $6.88 billion.
As summarized by Reuters, "growth in several business lines offset the drag from trade tensions and tariffs ... (and) Berkshire benefited as resilience in consumer spending helped cause U.S. economic growth to slow less than expected, offsetting a contraction in business investment."
Those profits, however, contributed to an increase in Berkshire's cash holdings. They now total a record $128 billion, up from the previous record last quarter of $122 billion.
That increase came even as Berkshire bought back $700 million of its own stock in the quarter.
 As we mentioned in Friday's newsletter, all that low-yielding cash, and some investors' growing impatience with Buffett's inability to find something reasonably priced to spend it on, has been contributing to Berkshire's underperformance against the stock market so far this year. Berkshire B shares are up 5.8%, but the benchmark S&P 500 has gained 22,3%, and that doesn't include dividends.
Berkshire's net income, which sometimes shows up in headlines, decreased 11% to $16.5 billion. Due to an accounting rule, net income must include market price gains or losses for a company's stock holdings, even if there have been no sales that would turn a "paper" loss into an actual loss.
As a result, Berkshire warns (in bold and italicized type): "The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules."
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