In a move that underscores Berkshire Hathaway’s cautious outlook, Warren Buffett’s investment giant amassed a historic cash reserve of $325.2 billion in the third quarter of 2024, marking an all-time high for the conglomerate. This milestone comes as Berkshire trimmed its stake in Apple, the world’s most valuable public company, reducing its Apple holdings by a quarter. These moves come amid a challenging quarter for Berkshire, which reported a 6% dip in operating profit, reflecting the complexities of managing a vast portfolio in a volatile economy.
Berkshire’s latest quarterly report reveals the sale of approximately 100 million Apple shares over the summer, reducing its holdings by 25% to around 300 million shares. Despite these reductions, Apple continues to represent Berkshire’s largest equity holding, valued at $69.9 billion. This divestment is part of a broader stock sale strategy, with Berkshire selling $36.1 billion in equities, including several billion in Bank of America shares. Buffett previously signaled his intention to keep Apple as Berkshire’s largest stock position, though he cited the advantageous 21% federal tax rate on capital gains as a factor in his decision to pare down holdings.
In addition to Apple and Bank of America, Berkshire’s overall stock sales have consistently outpaced new purchases over the past eight quarters. The company bought a modest $1.5 billion in new stocks during the quarter, signaling a cautious approach to valuations in the current market climate. In a further show of restraint, Berkshire refrained from repurchasing its own stock—a typical indication that Buffett doesn’t consider even his own company’s shares to be trading at a compelling value.
The third quarter saw Berkshire’s operating profit decline to $10.09 billion, or about $7,019 per Class A share, down from $10.76 billion the previous year. A key factor was the company’s insurance underwriting segment, which experienced a 69% decrease in profitability due to higher claims, hurricane-related expenses, and foreign currency losses as the dollar strengthened. The impact of Hurricane Helene contributed $565 million in underwriting losses, while a bankruptcy settlement concerning former talc supplier Whittaker Clark & Daniels added to the quarter’s insurance liabilities. Still, Geico, Berkshire’s renowned auto insurer, achieved a near doubling in its own underwriting profit, driven by a decrease in accident claims and reduced costs.
Other business segments within Berkshire fared better, providing stability in a mixed quarter. BNSF Railway enjoyed an uptick in shipments of consumer goods, bolstering profit, while Berkshire Hathaway Energy saw improvements as it achieved a reduction in operating expenses. Despite these gains, Berkshire anticipates additional insurance losses of up to $1.5 billion in the fourth quarter due to Hurricane Milton, which struck Florida in October, further impacting its insurance results.
Berkshire’s net income rose to $26.25 billion, or $18,272 per Class A share, a dramatic improvement from a net loss of $12.77 billion, or $8,824 per share, in the same period last year. This year-over-year rebound highlights a recovery in stock market values, enhancing the worth of Berkshire’s expansive investment portfolio. However, Buffett has consistently advised investors to prioritize operating profit over net income, which is subject to significant fluctuations due to unrealized investment gains and losses that must be reported quarterly under current accounting rules.
Now 94, Buffett continues to guide Berkshire Hathaway while preparing for an eventual transition to Vice Chairman Greg Abel, age 62. Under Buffett’s leadership since 1965, Berkshire has grown into a sprawling conglomerate based in Omaha, Nebraska, with stakes in multiple industries, including energy, real estate, retail, manufacturing, and insurance. Among its many subsidiaries are consumer brands like Dairy Queen and Fruit of the Loom, as well as the real estate giant Berkshire Hathaway HomeServices.
As Berkshire enters the final stretch of 2024 with unprecedented cash reserves, Buffett’s strategy reflects a careful and measured approach to market risks and opportunities. The company’s financial strength positions it well to navigate future challenges, all while retaining the flexibility to act decisively when opportunities arise.
