Shares of Berkshire Hathaway nearly registered their worst day this year Tuesday, a loss almost certainly not connected to Monday’s bizarre issue that caused the New York Stock Exchange to show Berkshire shares down almost 100%, but still coming as a steep selloff that even confounded Wall Street analysts.
Warren Buffett’s Berkshire Hathaway has been surprisingly active on the market this week.
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Key Takeaways
- Berkshire Hathaway’s Class A shares fell more than 2% to below $620,000 by mid-afternoon, pacing toward their largest daily loss since February, while its cheaper “baby Berkshire” Class B shares sank more than% to just below $410.
- The selloff came as a “surprise” as it did not have a clear catalyst, Argus Research analyst Kevin Heal explained to Forbes, adding he doubted it had “anything to do” with the glitch.
- Heal noted that the losses for Berkshire came amid smaller stock declines for several of its largest investments in public companies—shares of Bank of America, Chevron, Chubb and Occidental Petroleum each fell 0.5% or more—adding it’s likely the selloff was due to some benign profit taking from investors who cashed in following Berkshire’s nice run (the stock is up 15% year-to-date, slightly outpacing the S&P 500’s 11% gain).
- Keefe, Bruyette & Woods analyst Meyer Shields pointed to the “double whammy” pressuring Berkshire shares due to the accompanying shaky investor sentiment and expectations for stubbornly high interest rates, which drain not just the value of its nearly $400 billion worth of stock holdings but also the earnings potential in its own businesses, especially in its interest rate-sensitive insurance in its core insurance and energy subsidiaries, as a possible explanation for the Tuesday losses.
- “So much uncertainty about short-term rates [is] messing with day-to-day stock movements” for publicly traded asset managers like Berkshire, according to Morningstar analyst Greggory Warren.
Forbes Valuation
Buffett’s net worth shrank by $3 billion Tuesday as Berkshire shares slumped, with Buffett’s $135 billion fortune declining by the most of any billionaire outside of India, according to Forbes’ real-time billionaires tracker. Buffett, whose net worth is almost entirely comprised of his roughly 15% stake in Berkshire, is the eighth-richest person on the planet, falling behind Google co-founder Sergey Brin on Tuesday.
Crucial Quote
Both Heal and Shields also pointed to a $178 million settlement reached by a Berkshire-owned utility company Tuesday over 2020 wildfires on the West Coast as perhaps the most direct headwind facing Berkshire, though the news was announced during standard trading hours Monday. Though that’s chump change compared to Berkshire’s overall $189 billion cash pile, it’s “unBuffett-like news” that can “shake shares a little” considering the 93-year-old Berkshire chairman’s affinity for greenbacks, quipped Shields.
Key Background
Berkshire stock was surprisingly in the news Monday as the New York Stock Exchange incorrectly displayed a 99.97% intraday loss for Buffett’s firm due to a technical issue, causing a block on all trading for Berkshire’s Class A shares for nearly two hours. Berkshire is the eighth-largest public company in the world and is among America’s most profitable companies, generating $96 billion in its latest year, trailing only Apple’s $97 billion. Buffett, considered one of the most successful investors ever, oversaw a rise from Berkshire’s Class A share price from below $500 in 1980 to its over $600,000 level today.
