One hundred and forty-four pages. That’s the length of the latest annual report from Warren Buffett’s investment company, Berkshire Hathaway (BH).

To go through it would take days, if not weeks, for the layman, especially since the language is not particularly reader-friendly. If you aren’t well-versed in business and finance, it would be an uphill battle for sure.

So why bother? Well, being one of the most successful investors in the world, Buffett’s insights are invaluable to anyone who’s interested in finance and investment.

To help you out, here are five takeaways from BH’s annual report from 2022.

1. Berkshire Hathaway made a loss in 2022

Yes, you read right: BH made a loss of US$22.8 billion (RM100.5 billion) last year, which is a rarity for a company that has consistently made money.

To balance it out, it made a total profit of US$132.3 billion in 2020 and 2021, which more than covers the loss from last year.

If you had invested US$100 in BH since its beginnings in 1963, you would have received an average return of about 20% every year until now. In comparison, if you had invested in the S&P 500, you would have only made about half, at about 10% every year.

So, while BH made a loss last year, it invests for the long term and has a long track record of being profitable. As such, this blip isn’t something investors need to worry about.

2. This loss was due to investments

BH is making a loss from some of its stock investments, to the tune of a mere US$53.6 billion. The corporation is classifying this as mostly “unrealised losses”.

Think of it this way: you invest in a share for RM100 but, for some reason, it drops to RM80 the next day. However, you have done your research and are confident the company is solid, so you continue to hold on to it.

Technically, you have RM20 in unrealised losses but you haven’t actually sold the share yet to make that loss. The value of your investment could go back up to RM120 in the future and, when you sell it, you would have a “realised profit” of RM20.

BH’s main businesses are insurance, railroad, utilities, energy, manufacturing, services, and retail. Excluding unrealised losses from investments, profits from BH’s main businesses have increased 12.2%, from US$27.5 billion in 2021 to US$30.8 billion last year.

Long story short, BH is doing just fine.

3. Two major investments

BH made two major investments last year, pumping in about US$11.5 billion to acquire Alleghany, which specialises in property and casualty insurance and reinsurance. Alleghany is a pretty solid company with about US$2.4 billion in revenue, and it made about US$216 million in profits last year.

BH also paid about US$2.5 billion to acquire some of Dominion Energy’s (DE) businesses, which buy, sell and transport natural gas. DE, too, is a decent company, with about US$17.2 billion in revenue and US$985 million in profits in 2022.

4. Insurance and manufacturing

Of BH’s investments, insurance, as well as manufacturing, servicing and retail (MSR) did well last year compared with other sectors.

BH’s investment profits from insurance increased at a strong rate of 34.9% to US$6.5 billion in 2022 from US$4.8 billion the year before. Meanwhile, its MSR business profits also increased by 12.5% from US$11.1 billion in 2021 to US12.5 billion in 2022.

These make up about 61.7% of BH’s total business profits of US$30.8 billion.

So, when it comes to reading annual reports, look for the business breakdown and compute how much profits have increased, as well as the top two or three biggest contributors to these earnings.

5. Underwriting concerns

BH’s insurance underwriting business made about US$728 million in 2021 but suddenly made a loss of about US$90 million last year. This could be owing to Geico, which mainly provides insurance for automobiles in the US.

It made US$1.9 billion in losses in 2022 as more Americans began driving again after the pandemic. With an increase in accidents and motor-vehicle injuries, Geico has had to pay out more in insurance damages.

Funnily enough, this would mean such insurance companies would prefer you stay at home so they can make money!

All in all, don’t let Buffet’s thick annual report on Berkshire Hathaway stop you from gaining valuable insights on investing. Learn from the best to make better-informed decisions about your own investment decisions.

This article was written by Su-Wei Ho for MyPF. To simplify and grow your personal finances, follow MyPF on Facebook and Instagram.