Berkshire Hathaway 1q09 result

Berkshire Hathaway is a holding company that owns more than 70 business mainly in insurance, energy. It also has a $49B equity portfolio which owns large equity stakes in Coca-Cola, Wells Fargo, Proctor & Gamble and America Express etc.

1q09 results:

1. Total Reveune down 9.5% to $22.8B vs 1q08

• Exclude $5.0B & $1.5B investment & derivative losses in 09 & 08, reveune up 4.5% to;
• Exclude $1.8B retroactive reinsurance deal with Swiss Re in 09, reveune down 2.3%;
• As Buffett said, Berkshire is not immune from the financial crisis, but the reduction is reasonable or i should say better than peers and better than the overall consumer market;

2. 1q09 reported EPS (class B) -$33 loss from $20 profit;

• Exclude $3.2B investment & derivitve losses (after tax), net income down 11.7% to $1.7B
• Insurance underwriting profit up 21% to $219M. That's amazing, given most of its reinsurance peers are suffer with huge loss
• Unilities and energy profit down 36% to $203M mainly due to gas price down significantly in between 1q08 to 1q09

3. Balance Sheet

• Book value down 6.0% to $2,212 from 4q08, better than my expectation;
• Price / book as of Jun 1, 09 is 1.35. Altought it rise a lot from the "bottom", it still lower than company's historical average of about 1.8;
• Cash balance is similar to 4q08 at $25.6B;
• Net cash flow from opeartion remain strong at $4.6B or up 38.4% from 1q08;

Risk:

• Aging / retirement concerns for BRK's management team;
• Credit rating may fall derivative value / its equity holding continue to fall;
• Cost of capital may rise derivative value / its equity holding continue to fall;
• The conglomerate's nature makes it difficult and unclear to estimate the company's performance

Forecast 09
Based on 2009 equity market performance so far as of May 31 09, the equity market has been recovered a bit, so Berkshire should have profit in 2009.
Special deal should help to generate addition $1.7-$2.0B investment income per year start from 2009

Bilibala & Berkshire

• In Summer, i like to have ice cream at the Dairy Queen next to my office;
• Wirley Gum (Excel) wake me up whenever I feel sleepy during meeting;
• Bilibala is a value investor and follow Warren Buffett's investment way;

Comments:

BUY, adjust Fair Value to $4,866 from $4,640

Berkshire's stock buy & sell:

• Buy Burlington Northern, Johnson & Johnson, Wells Fargo, Union Pacific, US Bank Corp......
• Sell Conoco Phillips, Costellation Energy.....