Berkshire Hathaway's Cash Accumulation Amid Apple and Bank of America Stock Sales

OMAHA, Neb. — Warren Buffett has amassed over $325 billion in cash by continuing to sell off significant amounts of shares in Apple and Bank of America this year. Despite these sales, Buffett has enjoyed steady profits from various businesses under Berkshire Hathaway without pursuing any major new acquisitions.

Berkshire Hathaway disclosed that it sold about 100 million more shares of Apple in the third quarter. This follows a previous decision to halve its large investment in the tech giant last quarter. At the end of September, Berkshire's remaining stake in Apple totaled roughly 300 million shares valued at $69.9 billion. Although this remains Berkshire's largest single investment, it has significantly decreased from the end of last year when it was valued at $174.3 billion.

Investors may be surprised that Berkshire did not buy back any of its own shares during the latest quarter.

Cathy Seifert, an analyst at CFRA Research, noted that shareholders might be questioning why Buffett continues to hold onto so much cash. She suggested, “Are they more pessimistic about the future economic and market picture than perhaps others are?”

Buffett mentioned during the annual meeting in May that one reason he began selling some of his Apple shares was his expectation for rising tax rates in the future. Analyst Jim Shanahan from Edward Jones speculated that Buffett’s selling activity might also be influenced by the recent passing of Vice Chairman Charlie Munger. Shanahan pointed out that Buffett has typically been less comfortable with technology stocks compared to Munger.

“If Charlie Munger were still alive, perhaps he wouldn’t have sold down the position quite as aggressively — maybe at all,” Shanahan added.

In its recent statement, Berkshire reported that investment gains lifted its profits for the third quarter to $26.25 billion, translating to $18,272 per Class A share. This is a notable recovery from the previous year’s loss of $12.77 billion, or $8,824 per Class A share, which was primarily due to unrealized investment losses.

Buffett has consistently recommended that investors focus more on Berkshire’s operating earnings to assess the health of its businesses, as these figures exclude investment results. According to this metric, Berkshire's operating earnings declined only about 6% to $10.09 billion, or $7,023.01 per Class A share, compared to last year’s $10.8 billion, or $7,437.15 per Class A share.

Revenue for Berkshire remained relatively flat at $92.995 billion, slightly down from $93.21 billion a year ago, but still surpassing analyst expectations of $92.231 billion.

Berkshire owns a diverse portfolio of businesses, including insurance companies like Geico, the BNSF railroad, numerous utilities, and various retail and manufacturing firms, including Dairy Queen and See’s Candy.

One of Berkshire’s insurance businesses, Guard, reported further losses after management reassessed its previous policies.

Additionally, Berkshire clarified details about its recent purchase of the remaining shares in its utility business from the estate of former board member Walter Scott. The company paid $2.4 billion in cash, issued $600 million in debt, and provided the Scott family with Class B Berkshire shares valued at just over $1 billion. In total, this transaction amounted to approximately $4 billion. This transaction indicates that the Scott family received a less favorable price for their 8% stake in the utilities compared to a previous sale undertaken by Berkshire Vice Chairman Greg Abel, who sold a 1% stake in the utility business for $870 million two years prior.

Abel is poised to succeed the 94-year-old Buffett as CEO once Buffett steps down.

Berkshire, Buffett, Apple