My notes on the third quarter ;-)

Berkshire Hathaway grew its net worth by 6.1% during the first nine months of 2026, adding $43.9 billion to reach a total shareholders' equity of $761.4 billion. This $43.9 billion increase alone is roughly equivalent to the entire market value of Consolidated Edison. As of September 30, 2026, Berkshire's book value stood at approximately $536,590 per Class A share, representing the largest shareholders' equity of any company in the United States.

Net Earnings and Investment Gains

Berkshire Hathaway’s second-quarter GAAP net earnings dropped 28% to $22.1 billion from $30.8 billion reported in the prior year period.

However, these figures remain subject to heavy volatility due to fluctuations in the market value of Berkshire's massive equity portfolio. For the quarter, the company recorded $9.4 billion in investment gains—a combination of $7.7 billion in changes in unrealized gains and $1.7 billion in realized gains on sales of investments—compared to $17.3 billion in investment gains in the prior year period.

As of quarter-end, Berkshire’s "Big Five" holdings accounted for approximately 65% of its total equity portfolio. Performance among these equities was mixed during the past quarter:

• Apple led the group with a red delicious 15% gain, proving that their new iPhones are still core to their success.
• Coca-Cola popped a refreshing 6% as third quarter financial results remained bubbly.
• Alphabet dipped 4% as investors search for answers on the impact of the AI revolution.
• Bank of America pulled back 4% on regulatory fines and concerns.
• American Express dropped 10% with the company eliminating 5% of its workforce and taking large restructuring charges.

Revenues and Operating Earnings

During the third quarter, Berkshire’s total revenues increased 11% to $105.6 billion and operating earnings fell 6% to $12.7 billion due primarily to weakness in the insurance business. Profits at the company's railroad, energy, and manufacturing, service and retailing businesses increased.

Insurance
Berkshire Hathaway’s insurance segment delivered continued weak performance in the third quarter of 2026, with underwriting earnings declining 43% to $1.4 billion despite no significant catastrophe losses. Each of the three underwriting groups generated lower underwriting results. GEICO’s pre-tax underwriting earnings fell 45% to $982 million due to rising costs and a competitive landscape leading to higher commission and advertising costs. A bright spot in the insurance segment was $700 million in premiums written in Berkshire’s Reinsurance Group through its new agreement with Tokio Marine Holdings.

Insurance investment income dropped 14% to $2.7 billion, largely due to a lower interest rate environment affecting bond and cash yields compared to the prior year period. Berkshire's "all-important" insurance float—premiums held before claims are paid—grew by approximately $2.1 billion since year end to reach $178.5 billion. Because underwriting was profitable, the cost of this massive capital pool was effectively negative.

Railroad (BNSF)
BNSF’s third quarter revenue steamed ahead 15% to $6.9 billion, fueled by a 3.9% uptick in volume and a 10.5% rise in revenue per car/unit. The growth was led by a robust 8% surge in agricultural and energy shipments and a 6% increase in consumer product shipments, while the increase in revenue per car reflected higher fuel surcharges and yields.

Net earnings roared 19% higher to $1.7 billion. Earnings benefited from higher shipping volumes and improved operating efficiencies, partly offset by higher fuel costs.

Energy (BHE)
Berkshire Hathaway Energy delivered a 6% revenue increase to $7.8 billion in the third quarter of 2026 with net earnings rising 8% to $1.6 billion. The solid results reflected higher earnings from the U.S. utilities and natural gas pipeline businesses, partially offset by lower earnings from other energy businesses and real estate brokerage businesses.

PacifiCorp’s cumulative wildfire loss estimates reached approximately $2.85 billion by Sept. 30, 2026, with approximately $2.3 billion already paid. It is reasonably possible PacifiCorp will incur material additional losses beyond the amounts accrued.

Manufacturing

Berkshire’s Manufacturing businesses hammered out 20% revenue growth to $24.0 billion for the third quarter with operating earnings increasing 8% to $3.9 billion.

The Industrial Products segment delivered robust results with revenues jumping 29% to $12.2 billion and operating earnings rising 26% to $2.3 billion. While the Q1 acquisition of OxyChem provided a $1.3 billion boost to the top line, organic revenue growth was led by IMC and Precision Castparts. Driven by accelerated customer purchasing, IMC’s revenues rose 20% to $1.3 billion, while pre-tax earnings surged 30%. Notably, IMC’s global operations—including its significant manufacturing base in Israel—have remained resilient and unaffected by regional conflicts. Precision Castparts sales rose 19% during the third quarter to $3.2 billion with pre-tax earnings soaring 30%, reflecting strong aerospace and industrial gas turbine growth and improved manufacturing efficiencies. Lubrizol and Marmon also posted solid sales and earnings growth during the quarter.

Building Products revenues increased 19% to $8.4 billion, with operating earnings dipping 3% to $1.1 billion. Site-built units sold increased 87% in the third quarter primarily attributable to the acquisition of Taylor Morrison Home, which produced home sales of approximately $1.1 billion from the acquisition date. These results also reflect the transition of Acme Brick to Marmon at the beginning of the year and lower earnings from other building products due to higher raw materials and other input costs.

The Consumer Products segment saw a 4% revenue decline to $3.45 billion with operating earnings dropping 29% to $412 million. While lower sales volumes at Fruit of the Loom and Forest River pressured the top line, these were partially offset by growth at Brooks Sports, Duracell, and Richline. The earnings decline was driven primarily by lower tax credits at Duracell in the third quarter compared to the prior year quarter. Excluding that impact, earnings increased 5% thanks to increases in the footwear and apparel businesses.

Service and Retailing

Service and Retailing revenues increased 23% during the quarter to $40.5 billion with pre-tax earnings popping 29% to $1.5 billion.

The Service group delivered a standout performance, with revenues rising 23% to $7.1 billion and pre-tax earnings climbing 24% to $844 million. Growth was fueled by aviation services, electronics distributor TTI, and IPS (life sciences and data center construction services).

Retailing group revenues rose 1% to $4.9 billion, while pre-tax earnings dipped 1% to $299 million. Berkshire Hathaway Automotive (BHA) accounts for approximately 71% of the group’s top line with revenues up less than 1% during the quarter and pre-tax earnings declining 6% due to lower vehicle gross margins. The group’s other retail businesses increased sales and pre-tax earnings slightly during the quarter.

Pilot Travel Centers’ third-quarter revenues soared 48% to $16.1 billion thanks to higher fuel prices. Pre-tax earnings jumped to $183 million compared to a loss of $17 million in the prior year period.

McLane’s revenues declined 7% to $12.3 billion, primarily reflecting lower retail business sales due to net customer losses, partially offset by increased restaurant sales. Pre-tax earnings fell 22% to $135 million due to lower overall gross margins.

Financial Position
As of Sept. 30, 2026, Berkshire Hathaway maintains an exceptionally strong capital base of $761.4 billion, supported by significant liquidity. Excluding investments in railroads and energy, the company held $725.5 billion in total investments, with a heavy weighting toward cash and cash equivalents--holding the most cash of any U.S. company:

• Cash and Short-Term Investments: $352.3 billion (48.6% of non-operating investments).
• Equity Securities: $335.5 billion (46.2%), consisting of various marketable holdings.
• Equity Method Investments: $20.7 billion (2.8%), which includes significant stakes in:
• Kraft Heinz: 27.5% ownership.
• Occidental Petroleum: 26.5% ownership.
• Fixed-Income Investments: $17.1 billion (2.4%).

This massive liquidity position provides Berkshire with substantial "dry powder" for future acquisitions or market opportunities, as well as for significant share repurchases when the stock sells at a discount to its intrinsic value.

Free Cash Flow
During the first nine months of 2026, Berkshire generated $33.9 billion in operating cash flows (-2.5%) and invested $16.1 billion in capital expenditures (+9.5%), including capital expenditures of $10.2 billion by BNSF and BHE. BNSF and BHE maintain very large investments in capital assets (property, plant and equipment) and regularly make significant capital expenditures in the normal course of business. BHE and BNSF forecast capital expenditures for the remainder of 2026 of approximately $4.7 billion. Free cash flow during the first nine months declined 11% to $17.8 billion, reflecting the higher capital expenditures.

During the first nine months, Berkshire paid $41.8 billion to acquire equity securities, including approximately $28.6 billion of Alphabet and additional investments in Occidental Petroleum, Delta Airlines and Lennar. Berkshire received proceeds of $30.6 billion from the sale of stocks, including trimming back Bank of America and the liquidation of many of the stocks previously managed by Todd Combs, the former investment manager who departed Berkshire. Berkshire sold a net $12.0 billion in Treasury Bills and fixed-income investments during the first nine months of 2026.

On January 2, 2026, Berkshire acquired Occidental’s chemicals business (“OxyChem”) for approximately $9.4 billion. On Feb. 15, 2026, PacifiCorp announced plans to sell part of its Washington operations for $1.9 billion in cash which is expected to close in the first half of 2027. On July 24, 2026, Berkshire completed the acquisition of Taylor Morrison Home for approximately $6.8 billion.

Share Repurchases
Berkshire Hathaway continues to repurchase shares when market prices fall below intrinsic value, as conservatively determined by CEO Greg Abel in consultation with the Chairman of the Board (this implies Howard Buffett, the new Chairman, rather than Warren Buffett, who is now Chairman Emeritus).

During the third quarter, the company repurchased a record $9.6 billion in treasury shares (more than double the second quarter’s repurchases) including 1,983 Class A shares at an average price of $758,333 and 7,705,322 Class B shares at an average price of $506.64 in September.

Share repurchases continued subsequent to quarter end with an additional $2.0 billion of stock estimated to have been repurchased through October 28th, at an estimated average price of approximately $790,350 for the A shares ($528 for the B shares). This brings the total repurchase year-to-date to approximately $16.3 billion. This compares to the record $27.1 billion spent on repurchases in 2021.

Since Sept. 30, 2026, Berkshire’s stock surged nearly 18% to reach a record high of $878,328 per class A share on Nov. 5th, 2026. Given this rapid appreciation, I suspect Berkshire’s share repurchase activity will likely slow down significantly given the current valuation, unless there is a sharp pullback in the price.