Understanding NYSE BRK B Financial Performance
Have you ever insured your car with GEICO or grabbed a Blizzard from Dairy Queen? If so, you’ve been a customer of Berkshire Hathaway. It isn’t one single business, but a massive collection of companies you see every day, all guided by Warren Buffett’s famous investment philosophy. Understanding this is fundamental to any Berkshire Hathaway Class B stock analysis.
Many people see its stock ticker, BRK.B, and feel intimidated. In practice, it’s just the affordable way to own a small piece of that entire collection. While a single Class A share can cost as much as a house, the Class B stock was specifically created to be more accessible for everyday investors.
This analysis judges the company’s health using three straightforward concepts, similar to those you might use for your own finances. You will learn the key numbers that reveal if this corporate giant is performing well.
What Is Berkshire Hathaway, Really? The ‘Shopping Cart’ Full of Companies
Unlike a company that makes just one product, think of Berkshire Hathaway as a giant shopping cart. Instead of groceries, however, its cart is filled with dozens of other complete businesses. This special type of company is called a “holding company,” and its main job is to own other companies, letting them operate mostly on their own.
Many of these businesses are household names. Berkshire fully owns GEICO car insurance, Duracell batteries, Dairy Queen treats, and the massive BNSF Railway. So when you buy a share of Berkshire, you’re not just investing in one thing; you’re buying a small piece of a sprawling collection of American industry.
To make owning a piece accessible, Berkshire offers two stock tickers: BRK.A and BRK.B. Think of the original BRK.A share as a whole pizza—very valuable but priced out of reach for most. The BRK.B share is like an affordable slice of that same pizza, designed to give everyday investors a chance to own part of the empire.
The Two Engines Driving Berkshire’s Money Machine
To get a true picture of Berkshire Hathaway’s financial health, it’s helpful to see it as a machine with two very different engines. One is steady and predictable, while the other can be wild and unpredictable. Examining them separately reveals what’s really going on.
The first, and most important, engine is the profit generated by the companies Berkshire actually owns. This includes everything from the insurance premiums GEICO collects to the fees its railroad charges for hauling goods. This steady stream of profit is called operating earnings. It’s one of the key financial metrics for BRK B because it tells us how the core businesses are performing.
Berkshire’s second engine is its massive stock portfolio. Accounting rules force the company to report the daily swings in the value of its investments—like its huge stake in Apple—as part of its net profit. Warren Buffett himself warns investors that these paper gains or losses can be massive and misleading. A down quarter for the stock market can make Berkshire look unprofitable, even if its actual businesses had a fantastic year.
The Most Important Number: Why Buffett Focuses on Operating Earnings
So, how do we measure the performance of that first, steady engine—the one powered by Berkshire’s actual businesses? The answer is a term called operating earnings. Think of it like your personal budget: operating earnings are the equivalent of your reliable monthly paycheck, not a fluctuating investment gain or a one-time bonus. It’s the money a company makes from its normal, day-to-day operations.
For Berkshire, this means adding up all the profits from companies like GEICO, BNSF Railway, and Duracell, after all their business expenses have been paid. Crucially, it excludes the wild, unpredictable swings from the stock portfolio. This gives a much clearer and more stable picture of how the underlying businesses are actually performing, quarter after quarter.
This separation is why Warren Buffett himself tells investors to focus on this number. It cuts through the noise of the stock market’s daily mood swings and shows whether the company’s core collection of businesses is truly healthy and growing. A huge reported loss might just be a bad month for Apple’s stock, while strong operating earnings show the real money-making machine is humming along just fine.
While operating earnings show current profitability, another of Buffett’s favorite metrics reveals how Berkshire’s total wealth grows over time.
Book Value: How Buffett Measures Berkshire’s ‘Net Worth’
If operating earnings tell us about a company’s paycheck, then book value tells us about its total net worth. Think about it this way: imagine you sold everything you own—your house, car, and investments—and then used that money to pay off every single debt, like your mortgage and credit card bills. The cash left over would be your personal net worth. Book value is simply the corporate version of this, a straightforward calculation of a company’s total assets minus its total liabilities.
For decades, Warren Buffett’s primary public goal was to increase Berkshire Hathaway’s book value per share. This meant his focus wasn’t just on growing the company’s total net worth, but on ensuring each investor’s individual slice of that pie became larger over time. This shows a powerful commitment to building fundamental, long-term wealth for shareholders, not just chasing short-term stock price gains.
While the stock price can bounce around daily based on news and emotion, book value gives us a more grounded, long-term report card on the company’s progress. It shows whether the business itself is becoming more valuable over the years. A significant part of Berkshire’s book value today is its legendary cash pile, which raises an interesting question: is having all that cash on the sidelines a good or a bad thing?
The Giant Cash Pile: Is It a Good or Bad Thing?
That massive cash pile is what investors call “dry powder”—ready for action. On one hand, this cash provides immense financial safety; Berkshire can weather almost any economic storm. More importantly, it gives Warren Buffett the ability to make huge investments or buy entire companies instantly when a perfect opportunity arises, without needing to borrow money.
However, there’s a clear downside to holding so much cash. Money sitting in the bank earns very little, acting as a drag on the company’s overall growth. Every dollar that isn’t invested in a business or a stock is a dollar that isn’t working as hard as it could be to generate bigger returns for shareholders.
This tension highlights the core of Warren Buffett’s investment philosophy. He would rather wait patiently with his dry powder for a fairly-priced, wonderful business than rush into a mediocre deal just to spend the money. This discipline is a key reason many people still consider BRK.B a good long term investment.
Your New Toolkit for Understanding Berkshire Hathaway
You now have a toolkit for looking past confusing headlines and seeing Berkshire Hathaway for what it is: a collection of real businesses with performance you can track. When you next see a report on its quarterly results, put this into practice. Ignore the volatile ‘net income’ number and hunt for the ‘operating earnings’ figure to understand the real story of its core companies. By focusing on how the actual businesses are doing, you can turn complex news into clear insight and confidently assess the financial performance of any company.
