Berkshire Hathaway, the conglomerate led by Warren Buffett, saw its cash pile surge to a record high of $276.9 billion in the last quarter. This increase was driven by Buffett selling off large portions of stock holdings, notably in Apple. The cash hoard surpassed the previous record of $189 billion set in the first quarter of 2024, signaling a significant jump in liquid assets for the Omaha-based company.
Buffett has been on a selling spree for the past seven quarters, with the pace accelerating in the most recent period. In the second quarter alone, Buffett sold more than $75 billion in equities, bringing the total for the first half of 2024 to over $90 billion. This trend has continued into the third quarter, as Berkshire trimmed its second largest stake in Bank of America for 12 consecutive days. The filing from this week showed continued divestment in certain areas.
Despite the sell-off of stocks, Berkshire’s operating earnings in the second quarter saw a significant increase. Operating earnings, which include profits from fully-owned businesses like auto insurer Geico, totaled $11.6 billion in the second quarter. This marked a 15% jump from the $10 billion reported a year prior. Geico, a company Buffett once referred to as his “favorite child,” reported underwriting earnings of nearly $1.8 billion before taxes, more than tripling the previous year’s level. Meanwhile, BNSF Railway’s profit remained steady at $1.6 billion, and Berkshire Hathaway Energy’s utility business saw a decline in earnings to $326 million due to pressure from possible wildfire liability.
Buffett, who is approaching 94 years old, expressed his cautious approach to deploying capital at Berkshire’s annual meeting in May. Despite the sizable cash hoard, Buffett emphasized the need for attractive opportunities with low risk and high return potential. The investment icon mentioned that while he is willing to invest, high prices in the market have deterred him from making big moves. This sentiment is reflected in Berkshire’s limited stock buybacks of just $345 million in the second quarter, a significant drop from the prior two quarters.
The stock market has seen record highs in recent years, driven by investor optimism around the Federal Reserve’s monetary policies. However, concerns about a slowing economy have emerged following weak economic data, such as a disappointing July jobs report. The Dow Jones Industrial Average lost 600 points in response to the news, highlighting the fragility of the current market conditions. Additionally, worries about overvaluation in the technology sector, which has been a key driver of the market rally, have added to investor unease.
Berkshire Hathaway’s cash hoard reaching a record high reflects the cautious approach taken by Warren Buffett in today’s market environment. With continued selling of stocks and limited buybacks, Buffett is waiting for the right opportunities to deploy capital. The strong performance of fully-owned businesses like Geico has contributed to the conglomerate’s operating earnings growth, despite challenges faced by other sectors. As market uncertainties persist, Buffett remains patient in his investment decisions, emphasizing the importance of value and risk management in his approach.