Warren Buffett in Omaha, Nebraska, on May 3, 2024.
David A. Grogan
Berkshire-HathawayThe heavily monitored money holdings could exceed $200 billion – greater than your complete annual gross domestic product of Hungary – amid CEO Warren Buffett’s rare sale of a few of his favorite stocks.
The Omaha-based conglomerate is prone to say its money holdings have surpassed the previous record of $189 billion set in the primary quarter when it reports its second-quarter results on Saturday morning. Berkshire’s results come as Buffett is making profitable investments in Apple, Bank of America And BYDleading some to imagine that the Oracle of Omaha was concerned that the bull market was overheating.
“It looks like he wants to de-risk the portfolio a little bit,” said Bill Stone, chief investment officer at Glenview Trust Company and a Berkshire shareholder, earlier this week. “He’s cutting two top holdings and there’s nothing more economically sensitive than the banks. The market seems so sure of a soft landing right now, and maybe he’s taking a contrarian view.”
Berkshire has sold stocks for six consecutive quarters. Notably, Buffett reduced his massive Apple bet by 13% in the primary quarter for tax reasons after reaping huge gains. Selling could have resumed within the second quarter, because the iPhone maker’s shares rose 23% during that period.
In a surprise move, the conglomerate recently began dumping shares in Bank of America, its second-largest holding after Apple. Over the past 12 trading sessions, Berkshire has sold $3.8 billion price of the Charlotte-based bank’s stock. The Bank of America sales began in July and should not reflected within the second-quarter report.
Buffett’s vast war chest has yielded significant gains over the past two years because of rising Treasury yields, but with rates of interest set to fall from long-term highs, his growing money holdings could once more raise questions. Invested in three-month Treasuries at about 5%, $200 billion in money would yield about $10 billion a yr, or $2.5 billion 1 / 4, but those returns are expected to fall once the Federal Reserve starts cutting rates of interest.
“The question is how long they sit on it,” said Andrew Kligerman, Berkshire analyst at TD Cowen, in an interview, referring to Berkshire’s enormous money holdings.
“Things are not attractive”
Buffett, who turns 94 at the tip of the month, admitted at Berkshire’s annual meeting in May that he was willing to deploy more capital, but that prime prices gave him cause for hesitation.
“I feel it’s a fair assumption that [cash holdings] will probably be around $200 billion at the tip of this quarter,” the investment icon said at the time. “We would really like to spend it, but we won’t spend it if we don’t think [a business is] to do something that has little or no risk and may make us numerous money… it isn’t like I’m on a hunger strike or anything like that. It’s just that… things aren’t attractive.”
Berkshire-Hathaway
Weakness in the non-insurance sector
Investors will also be closely watching Berkshire’s quarterly results. BNSF Railway And Berkshire Hathaway Energy utility that has shown signs of weakness recently. BNSF is struggling with wage increases and declining revenue, while BHE is under pressure to be held liable for wildfire damages.
“The non-insurance side will weigh on results, whether it’s sluggish volume within the railroad sector coupled with higher labor costs, or the utilities, which could deliver a superb quarter, but given the liability risk, nobody is prone to be glad about that,” said TD Cowen’s Kligerman, who recently initiated research coverage on Berkshire with a hold rating.
One bright spot, however, was Berkshire’s insurance business, which reported a 185% increase in insurance revenues in the first quarter compared to the previous year.
Berkshire shares have gained more than 21 percent this year, outperforming the S&P 500’s 14 percent return through Thursday. The conglomerate’s market capitalization has risen to $956 billion, approaching the small number of U.S. stocks worth a trillion dollars or more.
