(Reuters) -Warren Buffett's Berkshire Hathaway ( BRK/A ) said on Saturday it took a $3.76 billion write-down on its stake in Kraft Heinz ( KHC ) during the second quarter, an acknowledgment the decade-old investment hasn't worked out.

Berkshire also reported a 4% decline in quarterly operating profit as insurance underwriting premiums fell. The write-down and lower gains from common stocks caused a 59% drop in overall net income.

Buffett's conglomerate signaled it remains cautious about market valuations, amid uncertainty about tariffs and growth in the broader economy.

It reported a near-record $344.1 billion cash stake, and sold more stocks than it bought for an 11th straight quarter. As of mid-July, Berkshire hadn't repurchased any of its own stock since May 2024.

Buffett, 94, has led Omaha, Nebraska-based Berkshire since 1965, though he plans to step down at year-end.

"Investors are getting antsy and want to seek activity, and nothing is happening," said Kyle Sanders, an analyst at Edward Jones. "Buffett definitely views the market as overvalued, and will sit back and wait for something to come to him."

Uncertainty about trade policies, including tariffs, has become a headwind as delayed orders and shipments led to declining revenue at most of Berkshire's consumer businesses.

Jazwares, which makes the popular Squishmallows plush toys, saw revenue fall 38.5% in the year's first half.

Analysts viewed overall results as lackluster.

"Berkshire and the economy are at an inflection point," said Cathy Seifert, a CFRA Research analyst. "I don't think the market will embrace the combination of mediocre results, a lack of stock buybacks, and Berkshire's recent share underperformance amid a management transition."

Seifert and Sanders rate Berkshire "hold."

KRAFT HEINZ ( KHC )

Second-quarter operating income fell to $11.16 billion, or about $7,760 per Class A share, from $11.6 billion a year earlier. Results included $877 million of currency losses as the U.S. dollar weakened.

Net income, including gains and losses on stocks such as Apple and American Express, fell to $12.37 billion from $30.35 billion. Revenue fell 1% to $92.52 billion.

Buffett views unrealized investment gains and losses, including on stocks Berkshire has no plans to sell, as often meaningless to understanding his company.

The $3.76 billion after-tax write-down for Berkshire's 27.4% Kraft Heinz ( KHC ) stake, equal to $5 billion before taxes, followed the struggling food company's announcement it would consider strategic alternatives, which could include a breakup.

Berkshire had carried Kraft Heinz ( KHC ) on its books at above-market value but said economic and other uncertainties, and its longer-term plans to remain an investor, made the gap "other-than-temporary."

The write-down is Berkshire's second for Kraft Heinz ( KHC ), following a $3 billion write-down in 2019.

Buffett acknowledged at the time that Berkshire overpaid in the 2015 merger of Kraft Foods and H.J. Heinz, one of his biggest investment missteps.

Kraft Heinz ( KHC ) has suffered as more shoppers favor healthier and private-label alternatives. Its approximately 200 brands include Oscar Mayer, Kool-Aid, Velveeta and Jell-O.

Berkshire also carries another big investment, its 28.1% stake in Occidental Petroleum at $5.3 billion above fair value, but reported no need for a write-down.

LAGGING THE MARKET

Shares of Berkshire have fallen more than 12%, and lagged the Standard & Poor's 500 by about 22 percentage points, since Buffett announced on May 3 he would step down as chief executive at year end.

Vice Chairman Greg Abel, 63, will succeed him, though Buffett will remain chairman.

Analysts said the premium embedded in Berkshire's stock price because of the presence of Buffett, arguably the world's most well-known investor, has eroded, while growth may slow in the insurance sector, a major Berkshire profit center.

The lack of new investments has also been a drag. Analysts believe Berkshire's BNSF unit could buy CSX to create another transcontinental railroad, after Union Pacific agreed on July 29 to buy Norfolk Southern.

Buffett transformed Berkshire over six decades from a troubled and since-closed textile company into a $1.02 trillion conglomerate.    

Berkshire owns several insurers and reinsurers, electric utility and renewable energy businesses, several chemical and industrial companies, and familiar consumer brands such as Dairy Queen, Fruit of the Loom and See's Candies.

BIG BEAUTIFUL BILL

Berkshire said the 12% quarterly decline in insurance underwriting profit stemmed primarily from reinsurance businesses and some smaller insurance businesses.

Geico, its best-known insurance business, saw pre-tax underwriting profit rise 2%, as a 5% increase in premiums offset a smaller rise in accident losses.

The car insurer has been ceding market share to State Farm and Progressive, while focusing on improving underwriting quality and technology and cutting jobs.

Analysts said higher tariffs could be a headwind for Geico if the cost of auto parts rose, potentially increasing losses from accident claims.

BNSF is also cutting expenses. Lower fuel costs helped boost quarterly profit 19% gain, though revenue and cargo volumes barely changed.

The energy business, Berkshire Hathaway Energy, posted a 7% profit increase.

Berkshire said it is evaluating the impact of the One Big Beautiful Bill Act, signed last month by U.S. President Donald Trump, on the "economics and viability" of its renewable energy, storage and technology-neutral projects.