Berkshire Puts Its Cash To Work While Softbank Bleeds

Sebastien Callebaut -

Stock Rout Pressures Berkshire's Earnings

Despite worries about slowing growth, Berkshire Hathaway's operating profits increased in the second quarter, but Warren Buffett's conglomerate was not immune to the general market turbulence. Operating earnings for the conglomerate, which include profits from its holding companies, such as insurance, railroads, and utilities, totalled $9.3 billion in the second quarter of 2022. It represented an increase of more than 38% year over year.

  • On its investments, however, the corporation reported a $53 billion loss for the quarter
  • After the Federal Reserve aggressively raised interest rates during the second quarter, stocks fell into a bear market as investors feared that the aggressive rate hikes would push the economy into a recession

Putting Cash To Work

Warren Buffet often spoke out against the high valuation fetched by many companies over the last years. This prompted Berkshire to hoard a massive cash pile of over $ 105B. The company is now putting its cash to work and has been slowly increasing its holdings in Occidental Petroleum, giving it a 19.4% interest in the company that is currently valued at $10.9 billion.

  • Occidental Petroleum has also been the S&P 500's best-performing stock this year and has seen its price more than double as a result of rising oil prices
  • Buffet also agreed to take over Alleghany back in March for $ 11.6B, its largest deal since 2016

Softbank Bleeds

After its Vision Fund investments were hurt by the global selloff in technology shares, Japanese technology investor SoftBank on Monday revealed a loss of more than $23 billion (¥3.1 trillion) for the three months ending in June.

  • This contrasts with a net loss of 2.1 trillion in the quarter between January and March. For the entire fiscal year that concluded on March 31, SoftBank recorded a record-breaking annual loss of 1.71 trillion
  • The disappointing results are a reflection of the global decline in technology shares, which was spurred by rising interest rates and China's crackdown on tech firms

As the pandemic unfolded and many technology companies rose to prominence, SoftBank jumped at the chance to invest heavily in these startups. According to SoftBank's filings, it invested $38 billion from its Vision Fund across 183 firms last year.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Markus Spiske on Unsplash.