Berkshire Hathaway, led by legendary investor Warren Buffett, has grown its cash reserves to an all-time high of $325.2 billion, increasing from $276.9 billion in just one quarter. Buffett achieved this by selling off large portions of the company’s stock investments, especially in major companies like Apple and Bank of America. As of September, Berkshire has sold about $36.1 billion in stocks, a strategy Buffett has maintained over the past year.
Cash Growth from Major Stock Sales
Buffett’s decision to sell stocks contributed significantly to Berkshire’s cash growth. He reduced Berkshire’s holding in Apple for the fourth quarter in a row and sold a substantial amount of Bank of America shares since July, earning over $10 billion from these sales. This increase in cash reserves reflects Buffett’s cautious approach to the stock market, as he likely anticipates changes in the economy and potential tax hikes.
No Stock Buybacks This Quarter
Berkshire chose not to repurchase any of its shares during this quarter, a shift from previous years when the company regularly bought back stock. This change comes as Berkshire’s shares have reached record highs, outpacing even the S&P 500 with a 25% gain this year compared to the S&P 500’s 20.1%. The company has a policy to repurchase shares only when Buffett believes the stock price is below Berkshire’s intrinsic value.
Earlier this year, Berkshire slowed down its buybacks, spending just $345 million on repurchases in the second quarter, down from $2 billion in the two previous quarters. With Berkshire’s stock price performing strongly, Buffett may feel that repurchases aren’t as favorable at current prices.
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Financial Performance and Market Outlook
Berkshire’s overall earnings from its core businesses, such as insurance and utilities, reached $10.1 billion for the quarter, a slight decline due to challenges in its insurance segment. This result was a bit lower than analysts expected.
Buffett’s strategy comes as the U.S. stock market has been rising, supported by hopes of a “soft landing” for the economy, with inflation slowing and potential interest rate cuts on the horizon. However, the 10-year Treasury yield has recently climbed above 4%, showing that rates are still fluctuating, which may signal future uncertainties for the market.
In light of economic pressures like rising national debt, Buffett has hinted that tax rates on capital gains may increase, which could impact investments in the future. His decision to hold onto cash and reduce stock holdings seems to be a hedge against these potential changes, emphasizing his cautious outlook as he monitors the market and the broader economy.
