Warren Buffett’s legendary investment firm, Berkshire Hathaway, has accumulated a record $325.2 billion in cash at the end of the third quarter, marking significant growth from the previous quarter’s $276.9 billion. This impressive increase is due to a series of strategic stock sales by Buffett, who continues on a “selling march” that has mainly impacted his largest holdings in Apple and Bank of America.
Massive selling in key stocks
During the third quarter, Berkshire sold about a quarter of its giant stake in Apple, a move that represents the fourth consecutive quarter of reductions at the holding company.
Additionally, since mid-July, Berkshire has generated more than $10 billion through the sale of its long-standing investment in Bank of America. In total, the firm divested $36.1 billion in shares in the latest quarter, a clear indication of Buffett’s conservative approach in a market he views as uncertain.
No share buybacks
Despite sitting on a mountain of cash, Berkshire Hathaway did not make buybacks of its own shares in the third quarter. This continues a downward trend in its buybacks, which reached a modest $345 million in the second quarter, down from $2 billion in each of the previous two quarters.
Berkshire’s policy on buybacks is clear: The company only executes these trades if Buffett believes the price is below the company’s conservatively determined intrinsic value.
Berkshire’s Class A shares have been a strong performer this year, rising 25%, outperforming the S&P 500’s 20.1% return. In the third quarter, Berkshire hit a market capitalization of $1 trillion, hitting a new high historical.
Berkshire evolution in 2024. Source: CNBC
Operating results and conservative stance in an uncertain market
Berkshire’s operating income, which includes profits from its wholly owned subsidiaries, reached $10.1 billion in the third quarter, down 6% from a year earlier due to weaker performance in its insurance segment. Although these results were slightly below analyst expectations, Buffett’s conservative stance stands out in a context of high inflation and fluctuating interest rates.
This approach aligns with the concerns of other big investors, such as Paul Tudor Jones, about the growing US fiscal deficit and the lack of commitment from presidential candidates to reduce spending. Buffett, for his part, has hinted that he is selling some of his positions in light of the possible increase in capital gains taxes, a measure that could be implemented to mitigate the growing deficit.
What’s next for Berkshire?
Berkshire’s monumental cash growth, along with its cautious approach, reflects Buffett’s view of preparing for potential economic turbulence. Meanwhile, the lack of buybacks suggests that the veteran investor believes his shares are well valued in the current market.
As the economic landscape evolves, Berkshire’s investment decisions will continue to be a benchmark for investors around the world, demonstrating that in times of uncertainty, cautious and conservative management can be the key to meeting future challenges.
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