Berkshire Loses $1.53 Billion

Berkshire lost 1.53 billion in the first quarter of 2009 compared to earnings of 940 million in the first quarter of 2008.

Is something lost, however, if you know right where it is?

That may be the question some are asking about the earnings--which were hurt by large write-offs of investments that many expect to work out well over time. (This is particularly the case with Buffett's big derivative bet on the markets.)

As the 10Q shows, the operating businesses struggled but both the utility and insurance operations put in a solid performance. Berkshire continues to show underwriting gains in its insurance business(es) and is using the (more valuable) float from them wisely.

Josh Funk, of the Associated Press, noted:

Berkshire officials say the company's operating earnings are a better measure of how the company is performing in any given period because those figures exclude derivatives and investment gains or losses. Berkshire reported $1.71 billion in operating earnings in this year's first quarter, which was down nearly 12 percent from $1.93 billion in operating earnings a year earlier.

This is an important point when trying to evaluate Berkshire today. The company's operating businesses are struggling, but still bringing in a lot of cash, and Buffett is able to invest that at what are most likely very low asset prices.

While those low prices have led to large write-downs, they also provide a big opportunity for Berkshire.

Heebner's Recent Moves

An interesting article is up at Forex Hound on Ken Heebner's recent moves. An excerpt:

If you have been following the market with even [one] eye you can see that move was again in error, but one positive thing about Heebner is if he changes his mind he will go whole turkey. So in the latest report those 3 positions are now GONE. Now his focus seems to be insurers, which have struggled since Jan 1 - but in theory if the government treats them as banks and takes some of their bad assets out and onto the tax payers shoulders; then you "win" ...

[Lists the biggest additions in Quarter 4]

If we assume he kept these for the past 6 weeks, Newmont Mining has an excellent run (in lockstep with gold), Research in Motion had an excellent run until a week ago when it updated its guidance and the stock has been in freefall since (it will be interesting to see if he hung on), healthcare has been one of the better places to hide, and adult education has been one of the "thesis" areas in the market. The rest is insurance, insurance, insurance.

Enjoy the rest of the article at Forex Hound or, where it appeared first, at Trader Mark's site.