Anamika Dey, editor
Brief news
- Berkshire Hathaway’s cash reserves reached a record $325.2 billion in Q3 2023, up from $276.9 billion in Q2, as Warren Buffett sold significant equity holdings, including Apple and Bank of America.
- The company did not repurchase shares during this period, contrasting with earlier buyback activities.
- Operational earnings fell 6% year-over-year to $10.1 billion, amid concerns over rising federal deficits and potential tax changes.
Detailed news
As Warren Buffett resumed his stock-selling frenzy and refrained from repurchasing shares, Berkshire Hathaway’s enormous cash pile surpassed $300 billion in the third quarter. This is a significant development for the company.
The earnings report that was issued on Saturday morning revealed that the cash fortress of the Omaha-based company had increased to a record $325.2 billion by the end of September. This figure represents an increase from the $276.9 billion that it had in the second quarter.
The Oracle of Omaha continued to sell major sections of his largest equity holdings, which included Apple and Bank of America, which resulted in the accumulation of substantial amounts of cash. During the third quarter, Berkshire said that it had reduced its enormous Apple holding by almost one quarter. This is the fourth consecutive quarter that the company has reduced its stake in Apple. As a result of selling its long-term stake in Bank of America, Berkshire has been able to realize more than ten billion dollars in profits since the middle of 2017.
In general, the 94-year-old investor maintained a selling stance as Berkshire divested $36.1 billion in stock during the third quarter.
Absence of buybacks
In the midst of the selling binge, Berkshire did not repurchase any of the company’s shares during the time in question. Earlier in the year, repurchase activity had already slowed down, and this was due to the fact that Berkshire shares had beaten the overall market and reached historically high levels.
The conglomerate had repurchased only $345 million of its own stock in the second quarter, a substantial decrease from the $2 billion repurchased in each of the previous two quarters.. The company asserts that it will repurchase stock when Chairman Buffett “conservatively determines that the repurchase price is below Berkshire’s intrinsic value.”
This year, Class A shares of Berkshire have increased by 25%, surpassing the S&P 500’s 20.1% year-to-date return.. In the third quarter, the conglomerate achieved an all-time high, surpassing the $1 trillion market cap milestone.
Berkshire’s operational earnings for the third quarter, which include profits from the conglomerate’s fully-owned businesses, were $10.1 billion. This figure represents a 6% decrease from the previous year as a result of subpar insurance underwriting. According to the FactSet consensus, the figure was slightly lower than the analysts’ predictions.
This year, the stock market has roared higher on prospects for a clean landing for the economy as inflation continues to come down and the Federal Reserve continues to lower interest rates. Buffett’s conservative stance comes at a time when the stock market has been flying higher. However, the 10-year Treasury yield has recently risen above 4%, indicating that interest rates have not quite complied.
Concerns have been raised by notable investors such as Paul Tudor Jones over the ever-increasing deficit in the federal budget and the fact that neither of the two presidential candidates who will compete against each other in the election next week will reduce expenditure in order to solve the problem. The idea that tax rates on capital gains would need to be hiked at some time in order to help fill the mounting deficit has led Buffett to imply that he was selling some of his stock holdings this year.
Source : CNBC News
