Important points
Berkshire Hathaway (BRK.A; BRK.B) on Saturday lowered its stakes in Apple (AAPL) and Bank of America (BAC), pushing its cash reserves to a record high, while The company reported lower profits for the third quarter.
Berkshire reported third-quarter operating income of $10.1 billion, down from $10.7 billion in the year-ago period and $11.6 billion in the previous quarter.
Berkshire’s cash stash hits record high
The conglomerate’s cash pile swelled to a record $320.3 billion from $271.5 billion in the second quarter. Most of Berkshire’s cash ($288 billion) is invested in Treasury bills.
Investors are watching Berkshire’s cash reserves for potential as “dry powder,” money that can be invested in businesses that meet Berkshire’s value-driven acquisition and investment strategy.
Berkshire suspended stock buybacks during the quarter. Buffett has touted the benefits of share buybacks in the past, writing in a letter to shareholders in 2022 that “The benefits of value-enhancing share buybacks benefit all owners in every way.” This must be emphasized.” But Buffett is famously frugal, and the price of Berkshire stock rose to an all-time high during the quarter.
Buffett sells Apple and Bank of America shares
The value of Berkshire’s stock portfolio fell to $271.7 billion from $284.9 billion in the previous quarter. Berkshire has aggressively pared back its stock positions this year to benefit from a strong stock market. The company has sold $133 billion in stock so far this year, compared to just $33 billion in the first nine months of 2023.
The value of Berkshire’s Apple stock suggests that Buffett has continued to reduce his stake in the iPhone maker. Apple stock rose more than 10% in the third quarter. However, Berkshire’s stake fell from $84.2 billion to $69.9 billion, suggesting that Buffett has sold about a quarter of his position. Buffett has already sold nearly half of his Apple stock, worth about $175 billion at the end of 2023, in the first six months of this year.
Another big change Buffett made to Berkshire’s five-biggest stock position was his well-documented offload of Bank of America stock. Berkshire began reducing its stake in the company in mid-July. Berkshire’s stock was valued at $31.7 billion at the end of the quarter, down from $41.1 billion at the end of June.
Hurricanes hit insurance profits
Investment income for Berkshire’s insurance business increased 50% to about $3.7 billion in the quarter. These gains were offset by a 70% decline in underwriting profits, which totaled $750 million.
Berkshire estimates that losses from Hurricane Helen wiped out $565 million from its operating income in the quarter. The company estimates that losses from Hurricane Milton, which hit Florida in early October, could be between $1.3 billion and $1.5 billion. These losses will be reflected in the company’s fourth quarter results.
Profits at Berkshire Hathaway Energy, recently made a wholly owned subsidiary, tripled to $1.6 billion due to higher revenue from natural gas pipelines and lower litigation costs.
Berkshire’s rail revenue increased 13%, benefiting from increased traffic and lower operating costs.
