Berkshire Hathaway, Warren Buffett’s holding company, announced its third quarter results on Saturday. While profits fell, cash flow reached a new all-time high of $325 billion, an amount never before recorded for a private company. But why does Warren Buffett keep so much cash?
This year, Berkshire made $97 billion on $133 billion in shares sold, resulting in net profit of $76.5 billion after taxes. Berkshire’s operating profits fell 6% in the third quarter, driven by hurricane-related insurance losses and rising reinsurance costs. Losses from Hurricane Helene cost $565 million, and projected losses from Hurricane Milton could reach up to $1.5 billion. Despite these challenges, Berkshire’s Class A shares are up 25% this year, outperforming the S&P 500.
Source : Zonebourse
Massive sale of his favorites
Over the past two years, Berkshire has sold $166 billion worth of stock, finding few attractive opportunities in the U.S. stock market. Last quarter, Berkshire reduced its stake in Apple to $69.9 billion, selling about 100 million shares. In just over a year, Buffett sold nearly two-thirds of his Apple shares, which once made up $178 billion of Berkshire’s portfolio. This massive sell-off is surprising, as Buffett had described Apple as one of Berkshire’s “four giants”, surpassing even Coca-Cola and American Express.
Besides Apple, Buffett also reduced his stake in Bank of America, selling more than $10.5 billion in shares. He found few other stocks interesting, purchasing only $1.5 billion worth of new shares.
About his war chest
The conglomerate’s cash flow therefore reached a new historic record of $325 billion, an amount never before recorded for a private company. The legendary American investor said he was comfortable with the idea of accumulating cash, finding alternatives in the market unattractive at the moment. Buffett anticipates higher U.S. tax rates, which could reduce Berkshire’s profits from future stock sales. Perhaps the Oracle of Omaha also anticipates a recession and/or lower asset prices in 2025? Only the future will tell us.
Source : Financial Times
A pause in share buybacks
Berkshire did not repurchase its own shares last quarter, despite a record rise in its stock price. He believes the stock price is too expensive and will buy his own shares again when the market value is lower than the intrinsic value.
Instead, Buffett invested in short-term Treasuries, enjoying high yields despite the Federal Reserve cutting interest rates.
Buffett, 94, continues to run Berkshire, but Greg Abel, his designated successor, will face the challenge of managing this vast financial empire.
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