NEW YORK (CNNMoney.com) -- Warren Buffett's Berkshire Hathaway posted a second-quarter profit that tumbled 40% from a year ago, as the company suffered a $1.4 billion paper loss on its derivatives bets.
The conglomerate reported quarterly net income of $1.97 billion, or $1,195 per Class A share compared with last year's $3.3 billion, or $2,123 per share, during the same quarter.
Berkshire's $1.4 billion decline in the market value of its derivatives bets on stock market indexes and other financial instruments followed a gain of $1.5 billion a year ago.
Excluding its investment and derivative business, the Omaha, Neb.-based company booked operating earnings per share of $1,866, a 63% rise from $1,147 in the same period last year.
Berkshire's book value, which includes capital gains and losses whether they are realized or not, rose 2.6% to $86,661 per share.
While CEO Warren Buffett has famously criticized derivatives as "financial weapons of mass destruction," he has lately expressed opposition to Wall Street regulation designed to make derivative trading safer.
Under the federal government's proposed derivatives rules, companies like Berkshire would likely be required to produce collateral for any new derivatives contracts, whereas Buffett has said Berkshire rarely engages in deals requiring collateral up front.
Led by investing legend Buffett, Berkshire owns companies ranging from insurance provider Geico to private jet operator NetJets to the railroad Burlington Northern Santa Fe Corp. Berkshire also has stakes in companies including Kraft Foods (KFT, Fortune 500), Coca-Cola (KO, Fortune 500) and American Express (AXP, Fortune 500).
Berkshire (BRKA, Fortune 500) made itself appealing to a wider investor audience by creating more affordable shares through its 50-for-1 stock split earlier this year. While its Class B shares (BRKB) once traded for more than $3,300 apiece, they now run at about $80 a pop and trade on the S&P 500 Index (SPX).
Year-to-date, Berkshire Hathaway's class A and class B shares are up more than 20%, but shares were down modestly at the close of trading Friday. 
| Index | Last | Change | % Change |
|---|---|---|---|
| Dow | 32,627.97 | -234.33 | -0.71% |
| Nasdaq | 13,215.24 | 99.07 | 0.76% |
| S&P 500 | 3,913.10 | -2.36 | -0.06% |
| Treasuries | 1.73 | 0.00 | 0.12% |
| Company | Price | Change | % Change |
|---|---|---|---|
| Ford Motor Co | 8.29 | 0.05 | 0.61% |
| Advanced Micro Devic... | 54.59 | 0.70 | 1.30% |
| Cisco Systems Inc | 47.49 | -2.44 | -4.89% |
| General Electric Co | 13.00 | -0.16 | -1.22% |
| Kraft Heinz Co | 27.84 | -2.20 | -7.32% |
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