Long-time business partner, Charlie Munger, saw Berkshire Hathaway deliver a rather disappointing set of financial results for the 2022 financial year as inflation and persistent rate hikes suppressed performance amidst a tumultuous macro-environment.
The American multinational conglomerate holding company saw its fourth-quarter net earnings figure decline 54% from the prior year’s quarter, mainly attributable to the 65% year-over-year decline in quarterly investment and derivative gains. Investment and derivative gains plunged 186% to a loss of $53,612 million in 2022 from a profit of $62,340 million in 2021. The tumultuous 2022 financial year resulted in a drastic 126% year-over-year decline in Class B net earnings per share.
In Berkshire Hathaway’s annual letter, Warren Buffett emphasised his defence over stock repurchase programs, calling stock buyback critics “economic illiterate[s].” Stock repurchases amounted to approximately $2.6 billion during the fourth quarter of 2022, resulting in an annual stock repurchase spend of $7.9 billion, down from the record spend of $27 billion in buybacks in 2021. Buffett’s defence over stock buybacks is cemented on the belief that they “provide a lift to per-share intrinsic value,” further elaborating that “when the share count goes down, [investors’] interest in our many businesses goes up.” The famous value investor also stated that “Berkshire will always hold a boatload of cash and U.S. Treasury bills,” increasing its cash hoard to nearly $130 billion in 2022.
Technicals
The price action on Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B) has been consolidating sideways for the last four months, with the primary resistance and support levels firmly at $321.00 (green line) and $297.00 (red line), respectively. Looking at the 1D chart of Berkshire Hathaway (Class B shares), the price action has declined somewhat, approaching the $299.00 support level, closing at $305.18 on the last day of February.
For the bull case, a short-term trading opportunity could exist if the price action pushes above $314.00 (black dotted line), which could be the first resistance point for the bulls. If the price action breaches the resistance, the share price could potentially reach higher levels, around $321.00 a share (green line).
The bear case on BRK.B could see the price action move lower from the $314.00 share level (black dotted line) if market participants perceive the short-term headwinds as significant. If this does happen, then we could potentially see the price action move lower to support levels around $299.00 a share (red line).
Summary
With 2022 predominantly marked with record-high inflation levels and ongoing rate hikes, Berkshire delivered a dull set of financial results, especially evident in the company’s investment and derivatives line item. In the annual report, Buffett re-affirmed his support for stock buybacks, emphasising how valuable the corporate action can be for investors.
The possibility of a short-term trade exists for the bulls if the price action breaches the $314.00 resistance level. Still, the bears will also be aware of a possible retraction from the $314.00 resistance level back lower to find support around the $299.00 share level.
Sources: Berkshire Hathaway Inc., CNBC, Trading View
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