Warren Buffett, the investment sage of Omaha, has been on a selling streak, resulting in an unprecedented cash pile of over $300 billion for Berkshire Hathaway. This figure was reported at the end of Q3, showing an increase from $276.9 billion in Q2, according to the company’s earnings report published on a recent Saturday.
The cash reserves of Berkshire Hathaway have been ballooning, largely due to Buffett offloading significant portions of his major equity investments, including Apple and Bank of America. The third quarter saw Berkshire Hathaway divest approximately a quarter of its massive Apple stake, marking the fourth consecutive quarter of downsizing this investment. Moreover, the company has amassed over $10 billion since mid-July from selling its long-held Bank of America shares.
The 94-year-old mogul appears to be in a disposal mode, as Berkshire unloaded stocks worth $36.1 billion in Q3. Notably, the company refrained from repurchasing any shares during this period, despite the sell-off. This contrasts with the previous trend of share buybacks, which had already slowed down as Berkshire’s shares outpaced the broader market, reaching record heights.
Berkshire had bought back a mere $345 million of its own shares in Q2, a significant drop from the $2 billion repurchases each in the two preceding quarters. The company’s policy is to buy back shares when Buffett considers the repurchase price to be below what he conservatively determines as Berkshire’s intrinsic value.
The financial performance of Berkshire Hathaway this year has been impressive. The company’s Class A shares have registered a 25% gain, outstripping the S&P 500’s 20.1% return year-to-date. The company also achieved the milestone of a $1 trillion market cap in Q3.
However, Berkshire’s Q3 operating earnings, inclusive of profits from wholly-owned businesses, amounted to $10.1 billion, down by approximately 6% from the prior year due to weak insurance underwriting. This figure was slightly below analysts’ predictions based on FactSet consensus.
Buffett’s cautious approach is interesting, given the bullish stock market this year, fuelled by expectations of a soft landing for the economy, decreasing inflation, and continuous interest rate cuts by the Federal Reserve. However, investors like Paul Tudor Jones have expressed concerns about the escalating fiscal deficit, and doubt that either presidential candidate in the impending election will curb spending to tackle it. Buffett has hinted at offloading some stock holdings this year based on the possibility of an increase in capital gains tax rates to address the burgeoning deficit.
