Berkshire Hathaway, the company of billionaire investor Warren Buffet, is purchasing corporate debt and foreign government-issued securities even as Buffet has lowered spending on stock falls.
The company was holding approximately $11.1 billion in foreign government bonds in its insurance units back on June 30 according to a regulatory filing for August 7 that announced second-quarter results. Three months earlier the amount of bonds held by Berkshire was $9.6 billion.
The 78-year old Buffet spent $2.6 billion in fixed-maturity securities in the same three-month period compared with $350 million on stocks.
Buffet has made more moves to add fixed-income investments to his portfolios after less-than-favorable results from its plane-rental business NetJets, and companies like Wells Fargo & Co., that number among Berkshire’s equity portfolio holdings. The Nebraska-based company announced its first profit gain since 2007 as the payments from securities ordered from General Electric and Goldman Sachs Group infused new investment income.
Berkshire is receiving 10% annual interest from its preferred share holdings in Goldman Sachs and GE, a total of about $8 billion in investments. Additional securities purchases like those obtained from Swiss Reinsurance Co. and debt investments in Vulcan Materials Co. and Mars Inc. were a part of the firm’s announced fixed-income deals that were developed. These sources are expected to pay out more than $1.8 billion a year.
Despite declining dividend revenues from the company’s top stock holdings, Berkshire’s shift towards fixed-income reinforced investment income was 9% from the previous year to $1.87 billion focused at its financial and insurance operations.
Wells Fargo reduced its quarterly payout to shareholders by 85% in March, and U.S. Bancorp dropped its payment 88%. Berkshire is the largest shareholder in Wells Fargo.
The $350 million that Berkshire spent on equities in the second quarter is the lowest payout since 2005, at least, according to regulatory filings. The firm exceeding earlier numbers set in the first quarter, when Berkshire spent $624 million on equities including Wells Fargo.
Tags: berkshire hathaway, corporate debt
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