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Buffett says Berkshire followed same value investing principle on Amazon

During the quarter, gains from investments and derivative contracts jumped to $20.32 billion.

, ETMarkets.com|
Updated: May 04, 2019, 11.28 PM IST
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Amazon.com Inc shares surged over 3 per cent on Wall Street on Friday after reports that Berkshire Hathaway purchased shares of the internet retailing giant for the first time after ignoring it for years.

Sharing his views on the investment, the company’s 88-year-old Chairman and Chief Executive Officer Warren Buffett said people making the decision on Amazon are absolutely value investors.

“That has not changed. They are following value principles. They are smart and totally committed to Berkshire and I do not second-guess them,” he said. "The considerations are identical when you buy Amazon versus some bank stocks that look cheap statistically against book value and earnings," he said.

Catch all the big announcements made in Berkshire conference at Omaha

Share price of Amazon.com closed 3.24 per cent higher at $1,962.46 on Friday.

Buffett said Amazon itself has become a brand. “Kirkland is now a brand doing $39 billion. Kirkland does more business than Coke does. Certain retail systems have gained some power, and particularly in the case of Amazon and Walmart and Costco, they have gained more power relative to brands,” he said

Vice Chairman Charlie Munger said the new generation asset managers at Berkshire look at things way differently than they do, and they are smarter than them. “We screwed up on Google. We saw the Google advertising working for us, but still didn't go for the stock. We goofed up on that. Apple was atonement.”

Berkshire Hathaway on Saturday reported net earnings of $21.70 billion, or $13,209 per A share and $8.81 per B share, for the quarter ended March 2018. The company had posted a net loss of $1.14 billion for the same quarter last year.

Operating income rose 5 per cent, helped by the Geico and BNSF railroad, though it fell just shy of analyst forecasts.

“First quarter earnings of 2019 are just like first quarter of 2018. The bottom line figures are going to be totally capricious. Focus on operating earnings,” Buffett said.

During the quarter, gains from investments and derivative contracts jumped to $20.32 billion against a $8.02 billion loss in the same quarter last year.

“We believe investment and derivative gains/losses, whether realised from dispositions or settlements or unrealised from changes in market prices of equity securities, are generally meaningless in understanding our reported results or evaluating our economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in our periodic earnings,” Berkshire Hathaway said in a statement.

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