Warren Buffett Chooses 5% Treasury Bills Over Company Buybacks as Berkshire Hathaway's Cash Grows

Berkshire Hathaway Inc. is making headlines as its share repurchases have significantly decreased, reflecting a noticeable shift in Warren Buffett's investment strategy. Instead of buying back company stock, Buffett seems to favor 5% Treasury bills.

Key Developments: In 2024, Berkshire's buybacks dropped to only $2.9 billion, a substantial decline from $9.2 billion in 2023 and $7.9 billion in 2022. This information was highlighted by Lawrence McDonald, the founder of Bear Traps Report, who shared this on social media. The company’s cash reserves, however, have soared nearly 300% since 2022, reaching approximately $334 billion by 2025.

McDonald emphasized, “It’s NOT the size of the cash hoard, it’s the ‘rate of change’ in the size of the cash that’s most telling.” He noted that Berkshire’s rapidly growing cash position jumped from $109 billion in 2022 to $277 billion in 2024.

Buyback Numbers Over the Years:

2024: $2.9 billion
2023: $9.2 billion
2022: $7.9 billion

Buffett's decision to reduce buybacks comes at a time when he has also decreased Berkshire's stakes in various companies, such as Bank of America and Citigroup. Instead, proceeds from these sales are being reinvested into Treasury bills, driven by the improvement in Treasury yields. Nevertheless, Buffett advised caution regarding fixed-coupon bonds, expressing concern about their lack of protection against currency depreciation.

Broader Implications: This change in strategy reflects both the current state of the market and Buffett's prudent perspective. With U.S. stocks reaching record valuations, finding appealing acquisition targets has become a challenge for the legendary investor. Consequently, this has led to an unprecedented buildup of cash reserves, despite his long-standing preference for outright business ownership.

The 94-year-old Buffett addressed these trends in his recent annual letter to shareholders, reaffirming his dedication to owning businesses while managing a substantial cash pile. He reiterated that Berkshire would always allocate a significant portion of their funds into equities, primarily focusing on American stocks.

Future Recommendations:

Investors monitoring Berkshire Hathaway's strategy will want to keep an eye on both cash accumulation and Buffett's ongoing decisions related to equity investment. Understanding the factors behind these choices, such as current market conditions and expected returns, can provide insights into the company's future direction.

Berkshire, Buffett, Treasury