Berkshire's cash soars to $325 billion as Buffett sells Apple, BofA; operating profit falls
Adds analyst comments, financial details
By Jonathan Stempel
Nov 2 (Reuters) -Warren Buffett and Berkshire Hathaway BRKa.N extended theirretreat from stocks in the third quarter, further slashing their holdingsin Apple AAPL.O and boosting cash to a record $325.2 billion.
In its quarterly report on Saturday, Berkshire said it sold about 100 million, or 25%, of its Apple shares over the summer, ending with about 300 million.
Berkshirehas now sold more than 600 million of the iPhone maker's shares in 2024, though Apple remained itslargest stock holding, at $69.9 billion.
It sold$36.1 billion of stock overall, including several billion dollars of Bank of America BAC.N shares, and bought just $1.5 billion, making the quarter the eighth straight whereBerkshirewas a net seller of stocks.
Berkshire did not repurchase any of itsown stock, the first time that happened since the second quarter of 2018, suggesting that Buffett does not even view shares of his$975 billion conglomerate as a bargain.
Cathy Seifert, an analyst at CFRA Research in New York, said the cash buildup could be a warning sign.
"Berkshire is a microcosm of the broader economy," Seifert said. "Its hoarding cash suggests a 'risk-off' mindset, and investors may worry what it means for the economy and markets."
Berkshire also reported a 6% decline in quarterly operating profit to $10.09 billion, falling short of analyst estimates, largely from insurance underwriting losses including Hurricane Helene, and currency losses from a strengthening U.S. dollar.
These offset improved profitability at the Geico car insurer, where accident claims fell. Profit also rose at the BNSF railroad, which shipped more consumer goods, and Berkshire Hathaway Energy, where operating expenses declined.
Net income totaled $26.25 billion, reflecting unrealized gains on Berkshire's stock investments including Apple.
In May, Buffett said he expected Apple to remain Berkshire's largest stock investment, but selling made sense because the 21% federal tax rate on the gains would likely grow.
Buffett "wants to invest every penny he can in businesses that provide Berkshire an advantage. But at the same time he's willing to do nothing," said Tom Russo, a principal at Gardner Russo & Quinn in Lancaster, Pennsylvania, who has invested in Berkshire since 1982.
"He'll be there ready and loaded when other investors are despairing or capital-constrained," Russo added.
HELENE, MILTON
Operating profit from Berkshire's dozens of businesses fell to $10.09 billion, or about $7,019 per Class A share, from $10.76 billion a year earlier.
Analysts on average expected $7,611 per share according to LSEG IBES.
Profit from insuranceunderwriting fell 69%, dented by losses from older policies, $565 million from Helene, and a bankruptcy settlement tied to a defunct talc supplier. This more than offset a 93% jump in Geico's underwriting profit.
Seifert said she was disappointed by weaker-than-expected claims trends in the older insurance obligations.
"Many peers have already dealt with these, and this stands out by making Berkshire appear to be a laggard," she said.
Berkshire also projected $1.3 billion to $1.5 billion of pre-tax losses in the fourth quarter from Hurricane Milton, which slammed into Florida in October.
The $26.25 billion of netincome, or $18,272 per Class A share, compared with a loss of $12.77 billion, or $8,824 per share, a year earlier when falling stock prices reduced the value of Berkshire's investments.
Buffett has said operating results better reflect Berkshire's performance.
Accounting rules require Berkshire to report unrealized investment gains and losses when it reports net income, adding volatility that Buffett counsels investors to ignore.
Buffett, 94, has led Berkshire since 1965, and is expected to eventually transfer leadership to Vice Chairman Greg Abel, 62.
The Omaha, Nebraska-based conglomerate's businesses also include Berkshire Hathaway Energy, many industrial and manufacturing companies, a big real estate brokerage, and retail businesses such as Dairy Queen and Fruit of the Loom.
Berkshire's Class A shares are up 25% this year, while the Standard & Poor's 500 .SPX has risen 20%.
Reporting by Jonathan Stempel in New York; Editing by Ira Iosebashvili, Jason Neely, Daniel Wallis and Diane Craft
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