- The S&P 500’s 2nd-quarter earnings per share is set to drop 10% thanks to Berkshire Hathaway.
- Warren Buffett’s conglomerate disclosed an unrealized investment loss last quarter of $67 billion due to broad stock market decline.
- S&P Dow Jones Indices estimates that Berkshire’s unrealized investment loss will lower the S&P 500’s EPS by $4.74.
Berkshire HathawayPublic stock portfolio is so big that it’s expected to have an enormous impact on the overall earnings picture. S&P 500.
Portfolio, valued at $323 billion as of June 30, had suffered large unrealized losses during the second quarter. The large stock market sell-off.Buffett’s biggest positions were responsible for much of the decline. Apple, Bank of America?, and American ExpressAll of them fell by more that 20% in the fourth quarter.
These steep drops caused Berkshire Hathaway’s second-quarter loss of $66.9 million in unrealized investments. And those mark-to-market losses are ultimately included in the earnings per share results of both Berkshire and the broader index it’s in: the S&P 500.
Based on work done by S&P Dow Jones Indices senior index analyst Howard Silverblatt, the S&P 500’s second-quarter EPS is set to decline 12% year-over-year to $42.74 per share from $48.39 per share. The bulk of the decline is due to Berkshire Hathaway’s unrealized investments loss.
“Berkshire Hathaway’s Q2 2022 $66.9 billion ‘unrealized investment’ loss (mostly non-cash flow) decreased the S&P 500 EPS by approximately $4.74 per share,” Silverblatt said in a S&P 500 earnings and estimate report.
Excluding Berkshire Hathaway’s unrealized investment loss from the S&P 500’s second-quarter earnings would result in just a 2% year-over-year decline to $47.48 per share.
Warren Buffett isn’t concerned about the decline. Berkshire claimed that the drop is “meaningless”. Its regulatory filing for the second quarter.
“We believe that the investment gains/losses from sales and unrealized market price changes are often meaningless for understanding our reported earnings or evaluating periodic economic performance. Berkshire Hathaway stated that they believe that investment gains/losses in earnings over a given period have little predictive or analytical value.
The flipside of such a negative outsized impact Berkshire Hathaway’s stock portfolio is having on the S&P 500’s earnings per share results is that any sustainable rebound in the prices of Buffett’s stock portfolio could lead to a big boost in the index’s earnings per share going forward.
