Warren Buffett's Cash Reserve Surpasses $325 Billion Amid Apple Stock Sales

Warren Buffett now holds over $325 billion in cash as he continues to sell billions of dollars in shares from two major companies: Apple and Bank of America. This cash reserve has grown as Berkshire Hathaway has also benefited from steady profits from its diverse range of businesses, with no significant acquisitions made in recent times.

In the third quarter of this year, Berkshire Hathaway reported selling an additional 100 million shares of Apple, following a previous reduction of its investment in the tech giant last quarter. After these sales, Berkshire's remaining stake in Apple is about 300 million shares, valued at approximately $69.9 billion as of the end of September. This constitutes Berkshire's largest single investment, but it has been significantly reduced since the end of the previous year when the stake was worth $174.3 billion.

Shareholders might feel let down with the news that during this quarter, Berkshire did not buy back any of its own shares.

Analyst Cathy Seifert from CFRA Research noted that many shareholders may be questioning Buffett’s strategy of accumulating such a large sum of cash. She posed the question of whether this indicates a more pessimistic outlook regarding future economic and market conditions compared to others.

Buffett mentioned at the annual meeting in May that part of his reason for selling some a portion of his Apple shares is his expectation of rising tax rates in the future. Additionally, Jim Shanahan, an analyst from Edward Jones, speculated that Buffett’s stock sales may have been influenced by the passing of Vice Chairman Charlie Munger last year. According to Shanahan, Buffett has historically been less comfortable with technology companies than Munger was.

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

In a recent report, Berkshire announced that overall investment gains propelled its profits for the third quarter up to $26.25 billion, translating to $18,272 per Class A share. In contrast, a year ago, unrealized investment losses had caused Berkshire to report a loss of $12.77 billion, or $8,824 per Class A share.

Buffett has consistently advised investors to pay more attention to Berkshire’s operating earnings for a clearer understanding of how its underlying businesses are performing without the fluctuations from investment returns. By this measure, Berkshire's operating earnings slightly declined by about 6%, totaling $10.09 billion or $7,023.01 per Class A share, down from last year's $10.8 billion or $7,437.15 per Class A share.

Analysts surveyed by FactSet Research had predicted that Berkshire's operating earnings would be approximately $7,335.11 per Class A share.

Berkshire's total revenue remained relatively stable at $92.995 billion, compared to $93.21 billion in the previous year. This figure slightly exceeded the expectations of analysts, who had estimated revenue at around $92.231 billion.

Among its many assets, Berkshire owns a variety of insurance companies, including Geico, along with BNSF railroad, major utility companies, and various retail and manufacturing businesses such as Dairy Queen and See's Candy.

One of Berkshire’s insurance firms, Guard, has reported additional losses based on a reassessment of its policies from previous years.

In other news for the quarter, Berkshire clarified how much it paid to acquire the remaining shares of its utility business from the estate of former board member Walter Scott. They paid approximately $2.4 billion in cash, issued $600 million in debt, and awarded the Scott family Class B shares worth just over $1 billion, bringing the total compensation to around $4 billion. This indicates that the Scott family didn’t receive a particularly favorable price for their 8% stake in the utilities compared to when Berkshire Vice Chairman Greg Abel sold his 1% stake in the utility business two years ago for $870 million.

Greg Abel is poised to take over as CEO from the 94-year-old Buffett should he pass away.

Buffett, Berkshire, Apple