Cash Me If You Can

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What's going on?

When the going gets rough, the Buff gets going: Berkshire Hathaway – the investment guru’s world-renowned conglomerate – reported expectation-beating third-quarter earnings over the weekend.

What does this mean?

Berkshire’s results weren’t perfect: the conglomerate made money from its stock market investments – including the biggest of them, Apple – while suffering worse-than-expected losses from the energy, railroad, and insurance companies it owns. But that’s a pretty accurate reflection of the wider world right now: stock markets are soaring, even as the “real” economy stumbles on.

Thing is, Berkshire did play it safe for a while, making surprisingly few big moves earlier this year. But it perked up last quarter, announcing that it’d be investing in energy and Japanese trading companies, as well as data-warehousing firm Snowflake. And to top it off, the company went ahead and bought a record $9 billion worth of its own shares.

Why should I care?

For markets: All Berk, all bite.

In February, Berkshire CEO Warren Buffett explained the company would buy back its shares if, one, he thinks those shares are undervalued and, two, it has plenty of cash to spare. Number one looks true enough: Berkshire’s shares are underperforming the US stock market, which is currently at an all-time high. And number two’s a no-brainer: the company – which posted a record $147 billion cash pile in the second quarter – was less than a billion down from that in the third, even after the buybacks. And seeing as Berkshire’s still buying back shares this quarter, it doesn’t look like Buffett thinks anything’s changed.

The bigger picture: You old Softie.

Japan’s SoftBank – another conglomerate that owns stakes in technology, energy, and financial companies, as well as a fund that invests in tech startups – is also benefiting from rising stock markets. The fund just made its highest-ever profit thanks to a boom in tech company share prices, which lifted the value of its technology investments. Must be a nice change after some high-profile misses recently…

Originally posted as part of the Finimize daily email.

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