Key Takeaways
- Warren Buffett’s Berkshire Hathaway reported its profit declined in the third quarter while its cash pile ballooned to a record of more than $320 billion.
- Berkshire trimmed its stakes in both Apple and Bank of America, bringing its total proceeds from stock sales this year to about $133 billion.
- Berkshire paused stock buybacks last quarter as its share price surged to a record high.
Berkshire Hathaway (BRK.A; BRK.B) on Saturday reported its profit fell in the third quarter while its cash pile swelled to a record as it trimmed its stakes in Apple (AAPL) and Bank of America (BAC).
Berkshire reported third-quarter operating earnings of $10.1 billion, down from $10.7 billion a year ago and $11.6 billion in the prior quarter.
Berkshire’s Cash Stash Swells to Record
The conglomerate’s cash pile ballooned to a record $320.3 billion from $271.5 billion in the second quarter. The vast majority of Berkshire’s cash ($288 billion) is invested in short-term Treasury bills.
Investors watch the firm’s cash hoard closely for its potential as “dry powder,” money that can be invested in businesses that meet Berkshire’s value-focused acquisition and investment strategy.
Berkshire paused share repurchases in the quarter. Buffett has touted the benefits of repurchases in the past, writing in his 2022 letter to shareholders: “Gains from value-accretive repurchases, it should be emphasized, benefit all owners – in every respect.” But Buffett is famously thrifty, and the price of Berkshire shares surged to a record high in the quarter.
Buffett Sells Apple, Bank of America Stocks
The value of Berkshire’s equity portfolio declined to $271.7 billion from $284.9 billion in the prior quarter. Berkshire has aggressively trimmed its equity positions this year to take profits from a buoyant stock market. The firm has sold $133 billion of stock so far this year, compared with just $33 billion in the first nine months of 2023.
The value of Berkshire’s Apple stock suggests Buffett continued to trim his stake in the iPhone maker. Apple shares rose more than 10% in the third quarter. Yet Berkshire’s stake shrank from $84.2 billion to $69.9 billion, suggesting Buffett sold about a quarter of his position. Buffett had already dumped nearly half of his Apple stock, worth nearly $175 billion at the end of 2023, in the first six months of the year.
The only other major change Buffett made to Berkshire’s five largest equity positions was his well-documented offloading of Bank of America stock. Berkshire began trimming its stake in the lender in mid-July. At the end of the quarter, Berkshire’s stake stood at $31.7 billion, down from $41.1 billion at the end of June.
Hurricanes Hit Insurance Earnings
Investment income at Berkshire’s insurance businesses rose 50% to almost $3.7 billion in the quarter. Those gains were more than offset by a 70% slump in insurance underwriting profit, which totaled $750 million.
Berkshire estimates that losses from Hurricane Helene wiped away $565 million in operating profit during the quarter. The company estimated that losses from Hurricane Milton, which struck Florida in early October, could fall between $1.3 billion and $1.5 billion. Those losses will be reflected in the company’s fourth-quarter results.
Profit at Berkshire Hathaway Energy, which it recently made a wholly-owned subsidiary, tripled to $1.6 billion, boosted by higher earnings from natural gas pipelines and lower litigation costs.
Earnings at Berkshire’s railroad business increased by 13%, benefiting from higher volumes and lower operating costs.
