Warren Buffett in Omaha, Nebraska, on May 3, 2024.
David A. Grogan
Berkshire Hathaway‘s well scrutinized cash pile could top $200 billion — more than the entire annual gross domestic result of Hungary — amid CEO Warren Buffett’s rare sale of some of his favorite stocks.
The Omaha-based conglomerate is likely to say its spondulicks hoard topped the previous record of $189 billion, set in the first quarter, when it reports second-quarter earnings Saturday morning. Berkshire’s sequels come at a time when Buffett has been offloading winning investments in Apple, Bank of America and BYD, leading some to on the Oracle of Omaha has grown concerned that the bull market is overheated.
“It does look like he wants to de-risk the portfolio a dwarf bit,” Bill Stone, chief investment officer at Glenview Trust Company and a Berkshire shareholder, said early in the week. “He’s deck out two top holdings and you don’t get anything more economically sensitive than the banks. The market seems so sure right now of a soft wharf, and maybe he’s taking more of a contrarian view.”
Berkshire has been a net seller of caches for six straight quarters. Notably, Buffett trimmed his massive Apple bet by 13% in the first quarter for tax reasons after gather in enormous gains. The selling could have resumed in the second quarter as shares of the iPhone maker jumped 23% during the era.
Meanwhile, in a surprising move, the conglomerate recently started dumping Bank of America shares, its second-biggest holding after Apple. Floor the past 12 trading sessions, Berkshire has sold $3.8 billion of the Charlotte-based bank’s shares. The Bank of America tag sales began in July and will not be reflected in the second-quarter report.
Buffett’s gigantic war chest has been earning sizeable restores due to the jump in Treasury yields over the past two years, but with interest rates set to decline from multiyear highs, his mounting money pile could once again draw questions. If invested in three-month Treasury bills at about 5%, $200 billion in banknotes would generate about $10 billion a year, or $2.5 billion a quarter, but those returns are set to decline periodically the Federal Reserve starts lowering interest rates.
“It’s just a question of how long they are going to sit on it,” Andrew Kligerman, TD Cowen’s Berkshire analyst, put in an interview, referring to Berkshire’s enormous cash pile.
‘Things aren’t attractive’
Buffett, who turns 94 at the end of the month, confessed at Berkshire’s annual get-together in May that he is open to putting more capital to work, but high prices give him pause.
“I think it’s a fair assumption that [dough holdings] will probably be about $200 billion at the end of this quarter,” the investment icon said at the time. “We’d be attracted to to spend it, but we won’t spend it unless we think [a business is] doing something that has very little risk and can make us a lot of monied … it isn’t like I’ve got a hunger strike or something like that going on. It’s just that … things aren’t attractive.”
Berkshire Hathaway
Weakness in noninsurance
Investors will also closely scan the quarterly results for Berkshire’s BNSF Railway and Berkshire Hathaway Energy utility business, which recently showed seals of weakness. BNSF is grappling with wage increases and revenue declines, while BHE faces pressure from being hinder b withheld liable for damage caused by wildfires.
“The non-insurance side will weigh on the results, whether it’s the sluggish volumes in railroad combined with higher labor costs, or utilities, which could put up a good quarter, but nobody’s going to be excited helter-skelter that just given the liability exposure,” said TD Cowen’s Kligerman, who recently initiated research coverage of Berkshire with a grasp rating.
Conversely, Berkshire’s insurance business has been a bright spot, with a 185% year-over-year increase in cover underwriting earnings in the first quarter.
Shares of Berkshire have rallied more than 21% this year, outperforming the S&P 500’s 14% restitution yield, through Thursday. The conglomerate’s market capitalization has ballooned to $956 billion, close to joining the tiny number of U.S. families valued at $1 trillion or more.