By Daniel Shvartsman

Investing.com – Berkshire Hathaway’s (NYSE:) (NYSE:) conglomerate status means that each earnings report provides read-throughs to the broader economy. That played out in their Q1 report, which showed strong business performance – though only .3% growth in after-tax operating earnings – but also many mentions of inflation, supply chain issues, consumer strength, renewed business activity, and, judging by the company’s increased equity portfolio, optimism over at least some stocks.

Here are highlights from Berkshire’s 10-Q:

Insurance: GEICO headwinds from Used Car Inflation

GEICO was plagued by claims severeness in Q1, with its losses rising 32.2% and expense for loss adjustment. Used car price inflation and supply chain shortage were the primary causes, leading the famed auto insurer to post a pre-tax loss of $178 million, a reverse from Q1 2021’s $1.02 billion pre-tax gain. The increase in claim frequency may have been due to the recovery of economic activity and consumers as the pandemic ends. Other segments saw increased profits due to lower expenses and loss in the property/casualty segment.

Railroads: Staying ahead of the Inflation Curve

Berkshire’s railroad business, Burlington Northern Santa Fe, meanwhile benefited from inflation, with the unit’s pre-tax earnings growing 9% to $1.8B. Even with a 3.3% drop in freight volumes, revenues and earnings both grew. Volume was affected by supply chain problems. Coal shipping saw a 12.6% spike in volume. Despite the variability in revenue, each segment saw growth as BNSF increased rates for railroad cars and added a fuel surcharge. BNSF saw a 56% increase in fuel costs year-over-year, which was more than offset by rate hikes.

Residential Construction Still “Relatively” Strong

The housing sector was the major driver in Berkshire’s manufacturing segment, with building products growing pre-tax earnings 48.6%. Residential home construction demand fueled the growth even beyond supply chain issues (issues which “necessitated sales price increases”), though the 10-Q made note that rising interest rates could slow demand.

The industrial products part of Berkshire’s manufacturing segment grew pre-tax earnings 6.5%, with Precision Castparts benefiting from an uptick in flying and aviation-related demand, and higher metals prices boosted Marmon’s earnings. Consumer products saw revenues grow 17% but pre-tax earnings drop 11.5%, as Duracell and Berkshire’s apparel and footwear businesses (Fruit of the Loom, H.H. Brown Shoe Group) saw earnings drop 50%, due to, “significant increases in raw material, freight, labor and other operating costs and the impact of reduced sales volumes.”

Both the retailing and service business lines saw pre-tax growth of 22 and 18%, respectively. The aviation industry was the main driver for NetJets’ and FlightSafety’s growth. Berkshire Hathaway Automobile benefited from auto inflation to drive that segment.

An net stock buyer, which includes both other companies as well as its own shares

Finally, in Q1, Berkshire spent $41.4B on equities. Chevron (NYSE:) was the headliner, as it became Berkshire’s 4th biggest position (after Apple (NASDAQ:), Bank of America (NYSE:), and American Express (NYSE:)). It is estimated that the $25.9B position represents more than quadrupling of Berkshire’s end-of year stake in the energy company. Berkshire invested $7B in Occidental Petroleum, announced Alleghany Corporation (NYSE :), and revealed a large position in HP (NYSE 🙂 following the quarter’s end. Berkshire has not sold shares in Apple or Bank of America.

Berkshire bought $3.2B back of their shares. They concentrated in B shares. The average price for A shares was $470,408, and the $317.55 per share for B shares. In February and March, the pace of repurchasing increased significantly, while shares rose to new heights, despite greater market volatility. Stocks finished the quarter at $528.921 (for A) or $352.81(for B), and close Friday, April 29th, at $484.384 (for A) and $322.83 respectively.