Here is a comprehensive post about Berkshire Hathaway's profit and how to understand it.
How Much Profit Does Berkshire Hathaway Make? A Deep Dive into the Oracle of Omaha's Empire
Hello, savvy investor! Are you ready to unravel the financial mysteries of one of the world's most unique and successful companies, Berkshire Hathaway? You've heard the name, you know the man behind it, Warren Buffett, and you've probably seen the eye-popping share price of their Class A stock. But have you ever wondered, just how much profit does this behemoth actually make? It's not as simple as looking at a single number, because Berkshire Hathaway isn't just one company. It's a vast empire of diverse businesses. Let's break it down, step by step.
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| How Much Profit Does Berkshire Hathaway Make |
Step 1: Understanding the Two Faces of Berkshire Hathaway's Profit
Before we get to the numbers, let's engage with the most crucial concept: Berkshire Hathaway's profit has two distinct components. Ignoring one would give you a wildly incomplete picture.
Operating Earnings: This is the bread and butter. It's the profit generated from the day-to-day operations of the dozens of businesses Berkshire Hathaway owns outright. Think of companies like Geico, BNSF Railway, and a vast array of manufacturing, service, and retail businesses. This is the predictable, stable income stream.
Investment Gains/Losses: This is the more volatile, yet often very significant, portion. It comes from the changes in the value of Berkshire's massive portfolio of publicly traded stocks, like Apple, Coca-Cola, and American Express. These are "unrealized" gains or losses until the stocks are sold.
Why is this distinction so important? Because changes in accounting rules now require Berkshire to report these investment gains and losses directly in their net income. This can lead to dramatic swings in their reported profit, making the numbers look wildly different from one quarter to the next, even if the underlying businesses are performing consistently. Warren Buffett himself has repeatedly advised investors to focus on the operating earnings as a better gauge of the company's true performance.
Step 2: A Look at the Recent Numbers
So, what are the actual numbers? Let's examine some recent data to get a sense of the scale.
Tip: Take notes for easier recall later.
Sub-heading: Net Earnings - A Tale of Two Halves
Berkshire Hathaway's net earnings for the full year 2024 were approximately $88.99 billion, down from $96.22 billion in 2023. At first glance, this might seem like a decline. However, a deeper look reveals the impact of the volatile investment gains/losses.
In 2024, Berkshire had significant after-tax losses from investments, while in 2023, they had substantial gains.
For example, in the second quarter of 2024, Berkshire Hathaway reduced its stake in Apple by nearly 50%, selling a massive $75.5 billion worth of stock, which increased its cash reserves. This kind of portfolio change directly impacts the reported net earnings.
Sub-heading: Operating Earnings - The True Engine of Profit
Now, let's look at the more stable number: operating earnings.
In 2024, Berkshire's operating earnings were a robust $47.437 billion, a significant increase from $37.35 billion in 2023.
This is the number that truly reflects the health and profitability of the underlying businesses. It shows a strong and growing engine of profit.
Step 3: Breaking Down the Profit by Business Segment
Where does all this profit come from? Berkshire Hathaway is a collection of a diverse group of companies. Here's a look at the major segments and their contributions to the operating earnings (based on recent filings):
QuickTip: Read section by section for better flow.
Sub-heading: The Powerhouse: Insurance Operations
The insurance business is the core of Berkshire Hathaway and its most significant profit driver. This segment includes giants like Geico, Gen Re, and Berkshire Hathaway Primary Group.
Underwriting: This is the profit from premiums collected minus claims paid and expenses. Berkshire's discipline in underwriting has historically led to profits, and even when there are losses, the real benefit is the "float." This is the money collected in premiums that the company gets to hold and invest before it has to pay out claims.
Investment Income: The money from the "float" is invested, and the income generated from these investments is a huge contributor to Berkshire's overall profit. The investment income from the insurance segment alone in 2024 was a massive $13.67 billion.
Sub-heading: Rail, Utilities, and Energy
This segment includes the BNSF Railway and Berkshire Hathaway Energy (BHE).
BNSF Railway is one of the largest rail systems in North America, and it consistently generates billions in profit.
BHE owns and operates a portfolio of regulated electric and gas utility companies. This is a stable, capital-intensive business that provides a steady stream of earnings.
Sub-heading: Manufacturing, Service, and Retailing
This is the diversified group of companies that makes up a large part of Berkshire's portfolio. It includes everything from See's Candies and Forest River (recreational vehicles) to McLane Company (wholesale distribution) and Pilot Travel Centers (truck stops). Each of these businesses contributes its own share to the overall profit.
In the first quarter of 2025, the manufacturing, service, and retailing businesses collectively contributed a significant portion of the company's revenue and earnings before taxes (EBT).
Step 4: Investing in the Berkshire Hathaway Empire
QuickTip: Scroll back if you lose track.
Now that you have a better idea of how Berkshire Hathaway makes its money, you might be wondering how you can get a piece of the action.
Sub-heading: Class A vs. Class B Shares: The Key Difference
Berkshire Hathaway has two classes of stock: Class A (BRK.A) and Class B (BRK.B).
Class A (BRK.A) Shares: These are the original shares, known for their incredibly high price tag. As of late 2024, the price per share reached over $700,000! The high price is a deliberate choice by Warren Buffett to attract long-term, value-oriented investors who aren't interested in short-term trading. These shares have a lot of voting power.
Class B (BRK.B) Shares: Created in 1996 to make the stock more accessible to smaller investors, the Class B shares are a fraction of the price of the Class A shares (typically around 1/1,500th of the price). While they have the same economic interest in the company, they have significantly less voting power (1/10,000th of a Class A share).
Sub-heading: How to Buy Berkshire Hathaway Stock (BRK.B)
Since the Class A shares are out of reach for most, here's a step-by-step guide to buying the more accessible Class B shares:
Open a Brokerage Account: If you don't have one already, you'll need to open a brokerage account with a platform like Fidelity, Charles Schwab, Zerodha (in India), etc.
Fund Your Account: Transfer money from your bank account to your new brokerage account.
Search for the Stock: In your brokerage platform's search bar, type in the ticker symbol BRK.B.
Place Your Order: You can choose to buy a specific number of shares or, if your broker offers it, a fractional share for a specific dollar amount (e.g., you can buy Rs 1000 worth of BRK.B).
Submit the Order: Click the "buy" or "place trade" button. You are now a part-owner of Warren Buffett's incredible empire!
Frequently Asked Questions (FAQs)
How to interpret Berkshire Hathaway's earnings reports? Focus on the operating earnings to understand the performance of the underlying businesses. The total net earnings can be misleading due to the volatility of investment gains and losses.
QuickTip: Break down long paragraphs into main ideas.
How to find Berkshire Hathaway's financial reports? You can find Berkshire Hathaway's annual reports (10-K) and quarterly reports (10-Q) on the company's official website under the "News Releases" and "Financial Reports" sections.
How to calculate the "float" from Berkshire Hathaway's insurance business? The "float" is the net liabilities under insurance contracts. It is not calculated but is a reported figure. It is the money that Berkshire holds from premiums before it pays out claims. You can find this number in their annual reports, and it has consistently grown over the years.
How to calculate the return on my Berkshire Hathaway investment? You can calculate your return by taking the current value of your shares, subtracting your original investment, and then dividing that by your original investment. For a more sophisticated calculation, you can use the Compound Annual Growth Rate (CAGR) formula: .
How to buy Berkshire Hathaway Class A stock? Due to its high price, you need a significant amount of capital. The process is the same as buying any stock through a brokerage account, but you'll need to use the ticker symbol BRK.A.
How to convert Berkshire Hathaway Class A shares to Class B? Class A shares can be converted into Class B shares at any time. However, the conversion cannot be done in reverse.
How to invest in Berkshire Hathaway without buying individual shares? You can invest in exchange-traded funds (ETFs) or index funds that track the S&P 500, as Berkshire Hathaway is a major component of that index.
How to attend the Berkshire Hathaway annual shareholder meeting? Known as the "Woodstock for Capitalists," the annual meeting is held in Omaha, Nebraska. You need to be a shareholder to attend, and you can get tickets by showing proof of ownership of either Class A or Class B shares.
How to find out which companies Berkshire Hathaway owns? Berkshire Hathaway owns over 60 companies outright, and a list of these can be found in their annual reports and on their website. They also have a large portfolio of publicly traded stocks, which they disclose in their quarterly filings (13F filings).
How to understand why Warren Buffett doesn't split the BRK.A stock? Warren Buffett has famously stated that he believes the high price of the Class A shares attracts a certain type of long-term investor who is focused on the company's value, not short-term price fluctuations. He wants shareholders to be partners, not traders.
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