Warren Buffett's stock portfolio is so large that unrealized investment losses in the 2nd-quarter led to a 10% decline in earnings per share for the whole S&P 500




Warren Buffett speaks onstage
Warren Buffett speaks onstage  
  • The S&P 500's 2nd-quarter earnings per share is set to drop 10% thanks to Berkshire Hathaway.

  • Warren Buffett's conglomerate reported an unrealized investment loss of $67 billion last quarter due to the 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 Hathaway's public stock portfolio is so large it's set to have an outsized impact on the overall earnings picture for the S&P 500.

The portfolio, which totaled $323 billion as of June 30, suffered big unrealized losses in the second-quarter amid the broad stock market sell-off. Some of Buffett's largest positions drove much of the decline, with Apple, Bank of America, and American Express all falling by more than 20% during the quarter.

Those steep drops led Berkshire Hathaway to report $66.9 billion in unrealized investment losses during the second-quarter. 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.

According to 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. But Berkshire Hathaway's unrealized investment loss represents a big chunk of that decline.

"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 is not concerned about the decline, as Berkshire said the drop is "meaningless" in its second-quarter regulatory filing.

"We believe that investment gains/losses, whether realized from sales or unrealized from changes in market prices, are often meaningless in terms of understanding our reported consolidated earnings or evaluating our periodic economic performance. We continue to believe the investment gains/losses recorded in earnings in any given period has little analytical or predictive value," Berkshire Hathaway said.

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.

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