Warren Buffett Hoarded Lots of Cash and Drastically Reduced His Position in Apple

On November 2, Warren Buffett's Berkshire Hathaway announced the 2024 third-quarter earnings report. The report shows that Berkshire Hathaway has become a net seller of stocks for eight consecutive quarters and hoarded a huge amount of cash that has never been seen in the investment world. As of the end of the third quarter, the total cash and cash equivalents of the enterprise amounted to $ 325.2 billion, marking a record high.

 

According to the earnings report, Berkshire Hathaway's three-quarter total revenue was $92.995 billion but the revenue in the same period last year was $93.210 billion. The net earnings were $26.251 billion, unlike the net loss of $12.767 billion in the same period last year. The operating profit was $10.09 billion, lower than analysts expected. The operating profit in the same period last year was $10.761 billion. During the reporting period, the company's investment income was $20.51 billion; the investment income last year was a loss of $29.78 billion.

 

Berkshire Hathaway's cash reserves hit a new high of $276.9 billion when it disclosed its second-quarter earnings in August. In the third quarter, its cash reserves rose to $325.2 billion, breaking a new record. This change was largely due to Buffett cutting some key holdings.

 

 

During the third quarter, Berkshire Hathaway sold $36.1 billion in equity securities and bought $1.5 billion in equity securities. Berkshire Hathaway held investments in fixed-income securities with a fair value of $16.042 billion, of which $4.516 billion, $9.904 billion, and $1.394 billion were held in U.S . bonds, foreign bonds, and corporate bonds, respectively.

 

As of the end of the third quarter, 70% of Berkshire Hathaway's fair value of equity investments was concentrated on five companies: American Express, Apple, Bank of America, Coca-Cola, and Chevron. The value of holdings in American Express was $41.1 billion, compared with $28.4 billion at the end of last year. The value of holdings in Apple was $69.9 billion, compared with $174.3 billion at the end of last year. The value of holdings in Bank of America, Coca-Cola, and Chevron was $31.7 billion, $28.7 billion, and $17.5 billion, compared with $34.8 billion, $23.6 billion, and $18.8 billion, respectively, at the end of last year.

 

Berkshire Hathaway sold 100 million shares of Apple stock in the third quarter, the third-quarter report showed. After cutting its stake in Apple by nearly 50% in the second quarter, the company cut its stake by another 25% in the third quarter. Since the beginning of the year, Berkshire Hathaway's shares in Apple have fallen from 905 million to 300 million, reducing about two-thirds.

 

Notably, Berkshire Hathaway spent about $2.9 billion on repurchasing its shares in the first nine months. In the third quarter, the company did not repurchase any of its shares.

 

Berkshire Hathaway's large holdings of cash and cash equivalents have driven people to think about Buffett's motives and investment outlook. Buffett once said that massive liquidity gave Berkshire Hathaway the ability to remedy a crisis.

 

CFRA Research analyst Cathy Seifert said shareholders would want to know why Buffett held so much cash. “Is he more pessimistic about future economic and market conditions than others?” She added. But Edward Jones analyst Jim Shanahan has a different view. He said he did not know if part of the reason Buffett started selling Apple stock had anything to do with the death last year of Munger, Berkshire Hathaway's vice chairman, because the sell-off began shortly after his death. Shanahan said Buffett was never as comfortable with tech companies as his longtime partner Munger was, claiming “If Munger were still alive, maybe Buffett would not have been selling Apple as aggressively, maybe not at all.”

 

In addition, Berkshire Hathaway's third-quarter earnings report showed a drop in its operating profit as the company's insurance business was impacted by two hurricanes that hit the southeastern United States.

 

Berkshire Hathaway said Hurricane Helen caused $565 million in damage in the third quarter. Hurricane Milton, which hit Florida a few days later, was expected to cause $1.3 billion - $1.5 billion in damage in the fourth quarter. Overall, the company's operating profit fell 6% YoY to $10.1 billion. #warrenbuffett