Warren Buffett’s Berkshire Hathaway reported a staggering cash pile of over $300 billion in the third quarter, setting a new record for the conglomerate. This significant increase in cash reserves came as Buffett continued his trend of selling off large portions of his major equity holdings, such as Apple and Bank of America.
The conglomerate’s cash hoard reached a record $325.2 billion by the end of September, up from $276.9 billion in the previous quarter. This accumulation of cash was fueled by Buffett’s decision to reduce Berkshire’s stake in Apple for the fourth consecutive quarter and to offload a substantial portion of its Bank of America investment, yielding over $10 billion in proceeds since mid-July.
Despite the selling spree, Berkshire refrained from repurchasing any company shares during the period. The company’s buyback activity had already slowed down earlier in the year, with Berkshire purchasing just $345 million of its own stock in the second quarter, a significant decrease from the $2 billion repurchases in previous quarters. Berkshire emphasizes that it will only buy back stock when Buffett believes that the repurchase price is below the company’s intrinsic value.
In terms of stock performance, Berkshire Hathaway’s Class A shares have surged 25% year-to-date, surpassing the S&P 500’s 20.1% return. The conglomerate achieved a significant milestone in the third quarter when it surpassed a $1 trillion market cap and reached an all-time high.
However, Berkshire’s operating earnings for the third quarter totaled $10.1 billion, a 6% decrease from the previous year, primarily due to weak insurance underwriting. This figure fell slightly short of analysts’ expectations, according to the FactSet consensus.
Buffett’s cautious stance amidst a booming stock market reflects concerns about the economy and potential policy changes. With the stock market rallying on hopes of a smooth economic recovery and the Federal Reserve maintaining its accommodative stance, Buffett remains wary of the ballooning fiscal deficit and the potential for increased capital gains tax rates in the future.
Overall, Berkshire Hathaway’s continued focus on cash preservation and strategic investments underscores Buffett’s prudent approach to navigating uncertain market conditions. As one of the most respected investors in the world, Buffett’s moves are closely watched by investors and analysts alike for insights into the broader market trends.
