Warren Buffett’s Berkshire Hathaway has recently reported a record quarterly operating profit and a significant increase in its cash holdings. The company sold nearly half of its stake in Apple, resulting in a cash pile of nearly $277 billion. This move has led to speculation that Buffett may be losing faith in the U.S. economy or that he believes stock market valuations have become too high.
Berkshire Hathaway’s second-quarter earnings report, released on August 3, revealed operating earnings of $11.6 billion for the April-June period. This marks a 15 percent increase from the previous quarter and sets a new record for the Omaha-based company. The cash stake held by Berkshire Hathaway also saw a significant jump, rising from $189 billion in the first quarter to a record $276.9 billion by the end of June. The increase in cash holdings can largely be attributed to the sale of $75.5 billion worth of stocks, including a substantial portion of its Apple shares.
It’s worth noting that despite reducing its stake in Apple, Buffett stated at Berkshire’s annual meeting on May 4 that he remains a fan of the tech giant and expects it to remain the company’s largest stock investment. As of June 30, Apple’s value accounted for $84.2 billion of Berkshire’s aggregate fair value. The other top holdings include American Express ($35.1 billion), Bank of America ($41.1 billion), Coca-Cola ($25.5 billion), and Chevron ($18.6 billion).
This is the seventh consecutive quarter in which Berkshire Hathaway has sold more stocks than it has bought. Coupled with the growing cash pile, this trend suggests that Buffett may be expressing caution about the U.S. economy or considering that stock market valuations have reached unsustainable levels. The majority of the cash, amounting to $271.5 billion, is held in Berkshire’s insurance arm, which accounts for roughly half of the company’s profits. The remaining $5.4 billion is allocated to Berkshire’s railroad, utilities, and energy division.
In addition to reducing its stock holdings, Berkshire Hathaway has also decreased its spending on stock buybacks. In the second quarter, the company repurchased just $345 million of its own stock. Buffett emphasized at the annual meeting that Berkshire is only willing to spend its cash if the investment presents minimal risk and the potential for significant returns.
Despite achieving a record quarterly operating profit of $11.6 billion, Berkshire Hathaway’s revenue rose by only 1 percent to $93.65 billion in the April-June period. The net income, on the other hand, experienced a 15 percent decrease to $30.34 billion compared to the previous year. This decline can be attributed to the rising stock prices, which boosted the value of Berkshire’s investment portfolio.
It is also worth noting that Berkshire Hathaway’s Class A shares have performed well this year, increasing by 18 percent. This outperforms the benchmark S&P 500, which has seen a 12 percent increase year-to-date.
Overall, Warren Buffett’s recent actions, including the sale of Apple shares and the significant increase in cash holdings, suggest a cautious approach to the U.S. economy and stock market. While Berkshire Hathaway continues to perform strongly, these moves indicate a prudent strategy of preserving capital and seeking high-return opportunities with minimal risk.
