Investopedia / Julie Bang
Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) updated investors on its second-quarter financial results on Saturday, revealing that cash reserves have surged to a record high as the company further reduced its stake in Apple (AAPL), while operating profit increased as insurance activities posted a profit, and more.
Berkshire’s cash hoard rises to record $276.9 billion
Berkshire’s cash and U.S. Treasury holdings rose to a new record high of $276.9 billion in the second quarter, of which $234.6 billion was in Treasury bills. In the first quarter, the company’s cash pile totaled $189 billion.
Buffett has long been a fan of Treasurys, calling them “the safest investment there is” at Berkshire’s annual meeting in May, though the sheer size of Berkshire’s growing reserve has fueled speculation about how the company might ultimately deploy it — or continue to expand it, with Treasury bonds yielding more than 5%.
While the company could expand its portfolio, Buffett suggested earlier this year that there were few candidates in the U.S. that met Berkshire’s criteria, and that there were “basically no candidates” elsewhere. He said that “things don’t look attractive.”
The increase in Berkshire’s cash pile came after the company said it sold $75.5 billion of its stock in the quarter. The company used $345 million to buy back Berkshire shares.
Berkshire further reduces its stake in Apple
After reducing its stake in Apple by about 13% in the first quarter, Berkshire cut its holdings further. According to the report, its Apple shares were worth $84.2 billion at the end of the second quarter. That means the company sold about 390 million shares, or nearly half of its stake.
Berkshire also cut its stake in Bank of America (BAC) While not mentioned in Saturday’s report, recent filings showed that Berkshire continued to reduce its stake in Bank of America in July.
Despite the cuts, Berkshire retains significant stakes in Apple and Bank of America. The two stocks are still Berkshire’s top investments. However, Berkshire’s selloff in recent quarters has led to speculation that Buffett is worried about the market overheating or that he is raising money for successors.
Buffett had previously indicated in May that the Apple share sale came as Berkshire was building up its cash position, and said it was “highly likely” that Apple would still be Berkshire’s largest investment by the end of 2024.
Operating profit up by more than 15% due to improvement in insurance activities
Berkshire’s operating profit, which Buffett says provides a better picture of the health of its companies than net income, was $11.6 billion, up from $11.2 billion in the first quarter and $10 billion a year earlier.
Nearly half of Berkshire’s operating income gains came from underwriting and investments in Berkshire’s insurance businesses, as claims expenses and catastrophe claims declined. Berkshire’s BNSF Railway and Berkshire Hathaway Energy utility businesses weighed on results.
Berkshire Hathaway’s Class B shares have outperformed the S&P 500 so far this year, rising about 20% since the beginning of the year to close at $428.36 on Friday.
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