By Jonathan Stempel and Luciana Lopez
(Reuters) - Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N) on Friday said second-quarter profit soared 41 percent to a record high, reflecting substantial investment gains and improved results in manufacturing, service and retail businesses.
"It's clear that Warren Buffett's bet on the U.S. economy is paying off," said Michael Yoshikami, president of Destination Wealth Management in Walnut Creek, California, and a longtime Berkshire investor.
Net income rose to $6.4 billion, or $3,889 per Class A share, from $4.54 billion, or $2,763 per share, a year earlier.
Quarterly operating profit rose 11 percent to $4.33 billion, or $2,634 per Class A share, from $3.92 billion, or $2,384 per share.
Analysts on average expected operating profit of $2,482 per Class A share, according to Thomson Reuters I/B/E/S.
Book value per share, Buffett's preferred measure of growth, has risen 5.6 percent this year to $142,483.
Results included $1.96 billion of investment gains. Berkshire shed $2.86 billion of equities in the quarter, including a swap of a 40-year investment in former Washington Post publisher Graham Holdings Co (GHC.N) for a Miami television station and other assets.
Accounting rules require Omaha, Nebraska-based Berkshire to report these sums with earnings, though Buffett considers the amounts in any given quarter often to be meaningless.
Berkshire owns more than 80 businesses in sectors including insurance, railroads, energy, chemicals, food and clothing.
Analysts have said the company's increasing diversification over the years has made its fortunes more closely tied to the overall economy. The Commerce Department reported the U.S. economy grew at a 4 percent annual rate from April to June.
Berkshire's diversification helped in the quarter. While profit fell 8 percent in insurance, the company's best known business sector, earnings from other businesses grew 20 percent.
GEICO GROWS, BNSF DISAPPOINTS
Profit grew 29 percent from manufacturing, service and retail operations, such as Berkshire's Lubrizol chemicals and Forest River recreational vehicle units.
Pre-tax profit doubled in apparel, helped by lower manufacturing and pension costs at Fruit of the Loom.
Profit also increased 34 percent in energy and utilities, largely reflecting a year-end purchase of Nevada's NV Energy.
BNSF Railway's profit grew 4 percent, but Berkshire expressed disappointment, saying, "Service levels continued to be well below our internal standards, as well as those expected by our customers."
Many insurance businesses also posted improved results, with larger underwriting gains from Geico auto insurance and General Re reinsurance, and in a business that provides commercial and worker's compensation insurance.
The insurance results were hurt by a small underwriting loss in a business that insures against major catastrophes, which Berkshire attributed mainly to currency fluctuations.
"Insurance profit looked a little weak," said Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. "The rest of the business looked pretty good, which matches the slow-but-steady economic growth we keep hearing about."
Berkshire's cash stake surged to $55.46 billion from $48.95 billion at the end of March.
That gives Buffett ammunition to make one or more large acquisitions, which he calls "elephants." He has said he would partner on an acquisition, as in 2013 when Berkshire and Brazil's 3G Capital teamed up to buy H.J. Heinz Co.
Berkshire said it owns more than $119 billion of equities such as American Express Co (AXP.N), Coca-Cola Co (KO.N), International Business Machines Corp (IBM.N) and Wells Fargo & Co (WFC.N).In Friday trading, Berkshire Class A shares closed up $1,155 at $189,279. Its Class B shares rose 40 cents to $125.83.
(Reporting by Luciana Lopez in Grand Lake Stream, Maine, and Jonathan Stempel in New York; Editing by Jennifer Ablan and Leslie Adler)