Warren Buffett seems to be losing his enthusiasm for stocks, as Berkshire Hathaway’s cash reserves surged to nearly $277 billion. This increase came alongside a significant reduction in its Apple holdings, where approximately half of the stake was sold. Despite these moves, the conglomerate achieved a record quarterly operating profit.
The results suggest that Buffett, at 93 years old and widely respected in the investment world, is becoming cautious about the U.S. economy or possibly finding stock market valuations excessively high. These figures were released after a stock market downturn that led the Nasdaq into correction territory, coupled with a weak jobs report that raised concerns about U.S. economic activity and the Federal Reserve’s timing on interest rate cuts.
“If you look at the entire Berkshire picture and the macroeconomic data, a safe conclusion is that Berkshire is getting defensive,” said Cathy Seifert, an analyst at CFRA Research who rates Berkshire a “buy.”
Berkshire’s cash grew to $276.9 billion by June 30, up from $189 billion three months earlier, primarily due to a net sale of $75.5 billion in stocks during the quarter. This marked the seventh consecutive quarter where Berkshire sold more stocks than it bought. The company sold about 390 million Apple shares, adding to the 115 million shares sold from January to March, as Apple’s stock price increased by 23%. Despite these sales, Berkshire still held approximately 400 million Apple shares worth $84.2 billion as of June 30.
The second-quarter profit from Berkshire’s diverse businesses increased by 15% to $11.6 billion, or about $8,073 per Class A share, from $10.04 billion the previous year. Nearly half of this profit came from Berkshire’s insurance businesses, including a significant increase in underwriting profit at Geico.
However, revenue saw only a 1% rise to $93.65 billion, with little change in major businesses like the BNSF railroad and Berkshire Hathaway Energy. Net income dropped 15% to $30.34 billion from $35.91 billion a year earlier, influenced by rising stock prices that enhanced the value of Berkshire’s investment portfolio, including Apple.
Buffett has consistently advised shareholders to disregard Berkshire’s quarterly investment gains and losses due to their potential to cause substantial net profit or loss fluctuations.
Despite Berkshire’s pledge to maintain a minimum of $30 billion in cash, it often allows this amount to grow when it cannot find reasonably priced businesses or stocks to acquire. Buffett stated at Berkshire’s May 4 annual meeting, “We’d love to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money.”
Berkshire also reduced its stock repurchases, buying back just $345 million in the second quarter and none in the first three weeks of July. The company did not respond immediately to a request for comment on Saturday.
Buffett remains an ardent supporter of Apple, valuing its strong pricing power and loyal customer base. He indicated that Apple would likely remain Berkshire’s largest stock investment, though selling shares was prudent due to the 21% federal tax rate on gains. Since mid-July, Berkshire has also sold over $3.8 billion in Bank of America shares, its second-largest stock holding.
Buffett, who has led Berkshire since 1965, has grown it into a vast conglomerate with numerous businesses, including industrial and manufacturing companies, a major real estate brokerage, Dairy Queen, and Fruit of the Loom. Vice Chairman Greg Abel, 62, is expected to succeed Buffett as CEO.
In the second quarter, insurance profit rose 54% to $5.58 billion, bolstered by increased investment income and Geico’s higher premiums. However, profit at BNSF fell 3% due to increased legal reserves, and lawsuits also affected Berkshire Hathaway Energy, where profit dropped 17% due to the PacifiCorp utility unit’s wildfire-related costs.
Berkshire’s Class A shares closed at $641,435 on Friday, up 18% this year, compared to the S&P 500’s 12% rise.