Berkshire Hathaway sells off large share of Apple and increases cash holdings

Old_Joe

Warren Buffett’s firm increased its cash reserves to $227bn, sparking concerns about company’s view of US economy

Following are excerpts from a current report in The Guardian:

Warren Buffett appears to have soured on stocks, letting cash soar at his Berkshire Hathaway firm to nearly $277bn and selling a large chunk of its stake in Apple, even as the conglomerate posted a record quarterly operating profit.

Berkshire sold about 390m Apple shares in the second quarter, on top of 115m shares from January to March, as Apple’s stock price rose 23%. It still owned about 400m shares worth $84.2bn as of 30 June.

The cash stake grew to $276.9bn from $189bn three months earlier largely because Berkshire sold a net $75.5bn of stocks. It was the seventh straight quarter Berkshire sold more stocks than it bought.

Second-quarter profits from Berkshire’s dozens of businesses rose 15% to $11.6bn, or about $8,073 per class A share, from $10.04bn a year earlier.

Nearly half of that profit came from underwriting and investments in Berkshire’s insurance businesses.

Personal observation:
Would these be the same insurance companies that claim they are losing money?

Berkshire often lets cash build up when it can’t find whole businesses or individual stocks to buy at fair prices. Its cash may also signal concerns about the broader US economy – many investors view Berkshire as a proxy for it.

Government data on Friday that showed slowing job growth and the highest unemployment rate since October 2021 prompted some analysts to project multiple Federal Reserve rate cuts starting in September.

But Berkshire’s returns from short-term treasuries should decline once rate cuts begin.

“We’d love to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money,” Buffett said at Berkshire’s 4 May annual meeting, referring to Berkshire’s cash.

Since mid-July, Berkshire has also sold more than $3.8bn in shares in Bank of America, its second-largest stock holding.

Buffett remains a big Apple fan, reflecting the iPhone maker’s strong pricing power and committed customer base.

He said at the meeting that he expected Apple to remain Berkshire’s largest stock investment, but selling made sense because the 21% federal tax rate on the gains would probably grow.

Note: Text emphasis added in above.

Sven

Berkshire Hathaway have several insurance business. Geico is the company where they have been very profitable. Other casualty and property insurance business are having issues with wildfires and flood.

Buffet is seeing something we are not seeing yet. He sold some BOA very timely, but he still have quite a bit. I would not be surprised if he exits the entire Apple position by year end. Wish Charles Munger who explains thing really well.

Since he is not buying back his own stock, it implies that it is fully valued. My wild guess is that there will be a serious correction coming where he will deploy his cash.

yogibearbull

Geico had a loss in 2022.
It then cut costs and jobs, raised premiums, gave up some market share to become profitable in 2023.
Results of turnaround are showing in 2024.
It margins as % of premium have improved to 17%. Changes in profit levels alone don't provide the whole story or context.

Old_Joe

"My wild guess is that there will be a serious correction coming"

Yes, sir- and that's exactly what I'm worried about. Having survived for 85 years I'm a true believer in the old adage "If anything can go wrong it will, and at exactly the worst time and place".

If a serious correction should start in the next 100 days all bets are off on the election.

BaluBalu

How many of the MAG 7 grew earnings this quarter at 15% on a GAAP basis - not proforma or non-GAAP, non-stock comp basis?

hank

I can’t remember when Buffett wasn’t building cash. This “not finding much to buy” has gone on a long while. Albeit - He has picked up some new additions in recent years. But Hey - with short term credit yielding north of 5% who can blame him? One problem is the company is so large now it takes a sizable acquisition to move the needle much.

Thanks @Old_Joe for the link & excerpt.

Old_Joe

Also see:   ⇒ Fears of further market turmoil deepen after US economic data spooked investors

rforno

The amount of noise surrounding Buffet's stock trades continues to amuse me. The media and lots of internet investors seem to think it's a sudden move (despite taking months to effect and report) and/or try to divine some hidden meaning behind his moves in any given market climate. Heck, nothing he does impacts *my* market analysis / plans / investment ideas.

Herds gotta herd, I guess.