Berkshire Hathaway Q1 2020 Earnings And Book Value Estimates

Apr. 02, 2020 10:52 AM ETBerkshire Hathaway Inc. (BRK.A), BRK.BALL, AXP, BAC, CSX, KHC, OXY, UNP, VIS, WFC, XLU201 Comments
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Fishtown Capital


  • Berkshire's equity book got crushed 29% in Q1, driven lower by financials and airlines.
  • Berkshire's investment in Occidental Petroleum and Airlines could be wiped out, while other businesses like Precision Castparts could see writedowns.
  • On the positive side, Berkshire's end of year cash balance of $128 billion should provide lots of opportunity for Buffett and his investment managers in this environment.
  • Operating performance finished a bit weak in Q4 and will likely weaken further into 2020.

Like most of Corporate America, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) had a rough Q1 with its share price dropping 19% from $226 to the current price of $183. Berkshire's equity book was hit hard, falling 29%, largely from its overexposure to financials like Wells Fargo (WFC), Bank of America (BAC) and American Express (AXP). Airlines and Berkshire's recent investment in Occidental Petroleum (OXY) were also significantly impacted.

Despite all of the negatives, Berkshire's $128 billion in cash at the end of Q4 provides significant opportunity to Buffett and his investment managers to find deals in this environment.

Q1 Holdings Update

The value of Berkshire's investments in equity securities (excluding Kraft Heinz (KHC)) dropped 29% to $169.3 billion from $237.7 billion last quarter, driven by broad-based weakness, with financials taking a heavy hit.

Berkshire Top Holdings

From the ~$68.4 billion loss, after reducing the liability for future income taxes on the balance sheet as "Income taxes, principally deferred" and adding back 21%, we see a net book value loss of $54 billion for Q1.

I'm subtracting another $5 billion for Berkshire's preferred investment in Occidental Petroleum. I think there is a very real chance this investment gets completely wiped out. Occidental's bonds have been trading around 60 cents on the dollar, and I believe Berkshire should take an impairment on this investment in Q1.

Q1 Operating Earnings

Berkshire Operating Earnings

Berkshire's operating businesses were impacted by COVID in March, and I expect larger impacts in Q2.

Insurance-underwriting: I expect this segment to be break-even. I think GEICO is going to do well in Q1 and will have a record-setting Q2 with much of the country not driving. Accidents are way down according to many reports with everyone cutting back driving in March. Berkshire may have some insurance exposure to business interruption, and I will be reading the Q1 report

This article was written by

Fishtown Capital profile picture
Individual investor and family office principal with over 20 years of investment experience. I favor fundamental analysis and look for individual issues and asset classes that are out of favor and represent a good risk/reward trade off. I often employ options strategies, covered calls on companies I own that have gotten ahead of themselves, and writing puts on stocks that I'd like to own at lower prices.Educational background Finance MBA (NYU Stern) with Computer Science undergraduate.

Disclosure: I am/we are long BRK.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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