The strong recovery in the stock market — and a surge in the value of Apple’s stock, in particular — drove a rebound in profits for Warren E. Buffett’s Berkshire Hathaway in the second quarter.
Berkshire on Saturday said it earned $26.4 billion in the second quarter, a turnaround from a $49.7 billion loss in the first quarter, when a plunge in the stock market, prompted by the coronavirus outbreak, caused huge paper losses in Mr. Buffett’s giant stock portfolio. In the second quarter of last year, Berkshire earned $14.2 billion.
The weak economy, caused by the pandemic and business interruptions, weighed on many of the companies that the conglomerate owns. Berkshire warned that the pandemic could lead to changes in the economy that could negatively affect its operations. “We cannot reliably predict when business activities at our numerous and diverse operations will normalize. Nor can we predict how these events will alter the future consumption patterns of consumers and businesses we serve,” it said in its second-quarter filing.
Aside from its stock holdings in companies like Apple and Bank of America, Berkshire owns outright a wide array of large businesses — in the insurance, railway, energy, retail and manufacturing sectors — that provide a snapshot of the health of the American economy.
In the quarter, Berkshire reported a $26.7 billion increase in the value of its stock holdings, powered by a $27.7 billion surge in the value of the company’s investment in Apple’s stock, whose price has soared this year even as the global economy sputtered badly.
Berkshire’s stock gains don’t become cash profits until the company sells an investment, which was typically an uncommon occurrence. But in the second quarter, it sold its stakes in airline companies as Mr. Buffett soured on their prospects in the virus-afflicted economy. Overall, Berkshire sold $13.6 billion of equity securities in the second quarter, a jump from $2.1 billion in the first quarter.
Though Mr. Buffett has a long record as a savvy investor, Berkshire’s stock has performed worse than the broader stock market this year, falling 7.4 percent, versus a 3.7 percent increase for the S&P 500 stock index.
In a sign that Mr. Buffett might believe Berkshire’s shares are undervalued, the company spent $6.7 billion buying back its own stock in the second quarter, a record amount, and up from $1.7 billion in the first quarter.
During and after the 2008 financial crisis, Berkshire made big investments and acquisitions that ended up producing big returns. But the company has so far only announced one large acquisition during the coronavirus crisis — a $4 billion deal to buy natural gas pipeline assets that was agreed to last month. Berkshire said on Saturday that it expected the deal to close in the fourth quarter.
Berkshire’s holdings of cash and short-term Treasury bills — money it can, in theory, use to make big acquisitions in the future — rose to $146.6 billion in the second quarter from $137.2 billion in the first quarter.
Burlington Northern Santa Fe, Berkshire’s large North American railway operation, reported a fall in revenue in the second quarter as the pandemic contributed to a decline in volume of goods it transports. Berkshire’s manufacturing and retail businesses were also hit by the disruptions to the economy. The company also took a roughly $10 billion write-down on intangible assets related to Precision Castparts Corporation, a metal components manufacturer that it bought in 2016 for $32.7 billion.
Berkshire’s giant energy business reported a decline in pretax earnings in the second quarter but net profits were up because of a large tax benefit.
The company’s insurance operations showed the mixed effects of the pandemic. Berkshire said its Geico unit received fewer claims because its customers were driving less frequently during the pandemic. But the company said it expected claims to increase as driving picks up, and added that a program that gives renewing customers a 15 percent premium credit would weigh on future financial results.