Warren Buffett’s Berkshire Hathaway has reached an unparalleled $325.2 billion in cash reserves by the third quarter of 2024, underscoring a decisive shift toward caution as it navigates a turbulent financial landscape. This record cash stockpile comes in tandem with Berkshire’s reduction of its Apple holdings by 25%, a surprising move from a company that has traditionally emphasized long-term equity positions. Berkshire’s cash-focused approach is coupled with a challenging quarter, as operating profit declined 6% due to increased insurance liabilities and currency pressures linked to a strengthening U.S. dollar.
According to Berkshire’s quarterly earnings report, the conglomerate sold about 100 million Apple shares during the summer, trimming its stake in the tech giant to approximately 300 million shares. Despite the substantial sale, Apple remains Berkshire’s largest stock holding, valued at close to $69.9 billion at the quarter’s end. This Apple sale was part of a broader divestment strategy that saw Berkshire unloading $36.1 billion in stocks, including several billion dollars in Bank of America shares. Buffett has cited tax considerations as a motivator for these sales, noting the potential benefits of locking in gains under the 21% federal tax rate on capital gains.
In addition to scaling back on stock holdings, Berkshire’s acquisition activity remained modest, with only $1.5 billion in stock purchases during the quarter. This conservative buying pattern aligns with Buffett’s view that many stocks remain overvalued, making Berkshire a net seller of equities for the eighth consecutive quarter. Furthermore, Berkshire refrained from repurchasing its own shares, indicating that Buffett does not currently consider Berkshire’s stock price to offer substantial value for buybacks.
Berkshire’s diverse businesses encountered mixed results in the third quarter, with operating profit declining to $10.09 billion, or around $7,019 per Class A share, from $10.76 billion a year ago. This decline was largely driven by underperformance in the insurance segment, where underwriting profit plummeted by 69% due to higher claims, including $565 million in losses from Hurricane Helene. Additional pressure came from currency exchange losses and a bankruptcy court settlement tied to Whittaker Clark & Daniels, a former talc supplier. However, Berkshire’s Geico unit reported strong results, with underwriting profit nearly doubling as accident claims and costs both fell—a sign of Geico’s effective cost management and improved claim handling.
While the insurance segment struggled, other areas of Berkshire’s sprawling empire, including BNSF Railway and Berkshire Hathaway Energy, posted favorable results. BNSF reported an increase in profitability driven by higher consumer goods shipments, while Berkshire Hathaway Energy saw improved profit margins due to reduced operating expenses. Despite these positive outcomes, Berkshire’s insurance division anticipates further challenges in the fourth quarter, projecting up to $1.5 billion in pre-tax losses related to Hurricane Milton, which hit Florida in October.
Berkshire’s net income showed a sharp year-over-year improvement, rising to $26.25 billion, or $18,272 per Class A share, compared to a net loss of $12.77 billion, or $8,824 per share, in the previous year. This surge is largely attributed to favorable market conditions that boosted the value of Berkshire’s vast equity portfolio. However, Buffett continues to emphasize the importance of focusing on operating profit, which he argues is a more accurate measure of Berkshire’s ongoing performance, as accounting rules mandate that Berkshire report unrealized investment gains and losses in net income, creating potential volatility.
At age 94, Buffett remains actively involved in Berkshire’s strategy, with plans in place for Vice Chairman Greg Abel, now 62, to eventually take over leadership. Under Buffett’s leadership since 1965, Berkshire Hathaway has grown from a modest textile company into a global conglomerate based in Omaha, Nebraska, with extensive holdings across energy, real estate, retail, manufacturing, and insurance. Among its many subsidiaries are consumer-focused brands like Dairy Queen and Fruit of the Loom, along with significant industrial and real estate operations.
With its record cash reserve, Berkshire is uniquely positioned to adapt to emerging challenges and seize opportunities as they arise. Buffett’s measured approach signals prudence in a time of market fluctuation, reinforcing Berkshire’s standing as a formidable force with the flexibility to capitalize on future investment prospects.
