bar1080
3 days ago
Berkshire Fine Spinning Associates is Formed
Berkshire Fine Spinning Associates Inc. incorporated under Massachusetts laws in 1929 as a consolidation of Berkshire Cotton Manufacturing Co., Valley Falls Co., Coventry Co., the Greylock Mills, and Fort Dummer Mills. The company changed its name to Berkshire Hathaway in 1955 when it acquired Hathaway Manufacturing Co. Berkshire Fine Spinning Associates Inc. manufactured fine grades of cotton textiles and specialized in fine lawns, batistes, nainsooks, organdies, dimities, handkerchief cloths, broadcloths, oxfords, sateens, rayon and silk mixtures. Plants were located in New Bedford, Massachusetts. Berkshire offered 33,000 shares of common stock in 1929 at $40 per share as well as 4,860 shares of 7% Preferred stock, also at $40 per share. Unfortunately, the shares were offered in the middle of the 1929 bull market, and the share price collapsed soon after. In November 1929, the ask price for Berkshire stock was still at $40, but in November of 1931, shares sank to $0.50. Sales for the company declined and Berkshire ran losses until 1936.
As late as 1940, shares traded as low as $3, but profits and the share price picked up with the war. Berkshire did well enough that it was able to reinitiate a regular dividend in 1942 (the dividend had been suspended in March 1930), and in September 1947, the company had a 3-for-1 split. Of course, the split marked the high mark for Berkshire and the stock began a downward trend that lasted until 1962. The graph below shows the performance of Berkshire Hathaway Inc. stock from 1929 until 1967 when Warren Buffett took over the company. As you can see, there was little change in the stock price in the forty years before then. Berkshire lost money between 1930 and 1936, and it lost money in 1957, 1958 and 1961 to 1963. Despite the fact that sales had tripled between the 1930s and the 1960s, there was no comparable increase in profits. In 1963, Berkshire stock was still trading below the price it had been offered at in 1929!
Buffet Buys Berkshire
Buffett began buying shares in Berkshire Hathaway at less than $8 in 1962 and by 1966, Buffett and his partners had taken over the company.As soon as Buffett took over Berkshire, he began focusing on insurance and other businesses rather than textiles. Buffett had invested in American Express when Anthony de Angelis’s fraud caused the price of American Express to drop dramatically in 1964. In the 1970s, Buffett expanded his investments to include media companies (The Washington Post and ABC) as well as other companies that fit his investment criteria. The final Berkshire mill was closed down in 1985.
Berkshire Hathaway paid a regular dividend between 1942 and 1960 when the dividend was suspended due to losses. Buffett paid a $0.10 dividend in November 1967, but that was the only dividend the company ever paid under Buffett. Thenceforward, profits were reinvested in the company to allow the share price to grow. Buffett lived off of his $50,000 salary and outside investment income. Berkshire Hathaway stock continued to trade OTC until October 1976 when it listed on NASDAQ. The shares moved to the New York Stock Exchange in November 1988 and in May 1996, Berkshire issued lower-priced Class B shares to investors who could no longer afford to buy a share of Berkshire Hathaway, Class A shares, which by that time had risen in price to $35,000.
Berkshire Booms
The impact of Buffett on Berkshire was incredible. Shares in Berkshire which had gone nowhere for 40 years began increasing at a rapid pace. The stock closed at $18.625 in 1966. Shares first broke the $100 mark in 1977, the $1000 mark in 1983, the $10,000 mark in 1992 and the $100,000 mark 2006. Shares now trade around $200,000. Buffett could have bought any company and the results would have been the same. As soon as Buffett took over Berkshire Hathaway, he began to focus on other businesses and ignore the company’s core manufacturing business. In fact, at one point, Buffett said that buying the textile business had been the worst trade of his life. I guess everyone is allowed one mistake.
https://globalfinancialdata.com/berkshire-before-buffett
DiscoverGold
7 days ago
Here are all the moves Warren Buffett and Berkshire Hathaway $BRK.B made last quarter:
By: TrendSpider | November 14, 2024
• Here are all the moves Warren Buffett and Berkshire Hathaway $BRK.B made last quarter:
Bought $HEI.A, $DPZ, $POOL
Sold $COF, $NU, $SIRI, $BAC, $AAPL, $CHTR, $ULTA, $LSXMK, $LSXMA, $FND
Read Full Story »»»
DiscoverGold
gfp927z
1 week ago
>>> Warren Buffett is building the Noah's Ark of rainy-day funds. Here's why he's stacked up more than $300 billion.
Business Insider
by Theron Mohamed
November 13, 2024
https://finance.yahoo.com/news/warren-buffett-building-noahs-ark-195506592.html
Warren Buffett has grown Berkshire Hathaway's cash pile to more than $300 billion — a record high.
The famed investor has halted stock buybacks and pared key holdings such as Apple and Bank of America.
Buffett, 94, is facing a bargain drought and may be preparing to hand over control of Berkshire.
Warren Buffett has been selling shares and stacking up cash at a terrific rate, fanning speculation as to why the world's foremost stock picker is pulling his money out of the market.
Berkshire Hathaway roughly tripled its pile of cash, Treasury bills, and other liquid assets to a record $325 billion over the two years to September 30 (or $310 billion after subtracting almost $15 billion of payables for Treasury bill purchases).
The conglomerate's cash hoard now exceeds Berkshire's total market value just over a decade ago. It accounted for at least 27% of Berkshire's $1.15 trillion of assets at quarter end — the largest proportion in many years.
One big reason for the ballooning cash pile has been a lack of compelling things to buy. Buffett is a value investor who specializes in sniffing out bargains, and those have become rare finds in recent years.
"I have heard every speculative idea imaginable, from accumulating capital for a doomsday scenario to planning to make a gigantic cash dividend," Lawrence Cunningham, the director of the University of Delaware's Weinberg Center on Corporate Governance and the author of several books about Buffett and Berkshire, told Business Insider about the rationale for Berkshire's cash pile.
"Both seem far-fetched," he said. "The most likely cause of cash buildup at Berkshire is absence of attractive capital deployment opportunities."
Cunningham said stocks have surged to record highs, private-business valuations have jumped, Berkshire-owned businesses like Geico and See's Candies can only deploy so much money, and Berkshire's Class A shares have climbed to record levels of about $700,000.
Hot stocks
The US stock market's total value hit a record high of $58.13 trillion on Monday, an unprecedented 198.1% of US GDP last quarter, Wilshire Indexes data shows.
That metric is known as the "Buffett Indicator" because the investor once hailed it as an excellent yardstick for valuations. Buffett said it should have been a "very strong warning signal" when the measure spiked during the dot-com bubble, and buying stocks when it nears 200% is "playing with fire."
The Wilshire 5000's elevated level makes "this stock market the most overvalued in history — even higher than at the peak of the tech bubble in 2001-2002," Paul Dietrich, chief investment strategist at B. Riley Wealth Management, told BI.
It may be little surprise, then, that Buffett didn't buy back a single Berkshire share last quarter after spending $20 billion on repurchases between the start of 2022 and June 30 this year — likely because he and his team no longer see their company's stock as good value.
His team has also been paring Berkshire's stock portfolio. They sold $133 billion of stock — a sum that exceeds Citigroup's market cap — in the first nine months of this year, and bought less than $6 billion worth over the same period.
They cut Apple, their most valuable holding, by 60% in that timeframe. They also trimmed Bank of America, their number-two holding, by 23% between mid-July and early October.
Less buying and more selling fueled a $140 billion-plus increase in Berkshire's cash hoard in the nine months to September 30.
Frustration and preparation
There are other possible explanations for Berkshire's towering cash pile. Buffett suggested in May that a potential increase in capital gains tax factored into his decision to realize some of his massive gain on Apple — although Donald Trump's reelection is expected to stave off a near-term increase.
The "Oracle of Omaha" is earning much more on Treasury bills now than three years ago when interest rates were close to zero. On September 30 Berkshire owned $288 billion worth — more than the Federal Reserve.
The 94-year-old billionaire may be crystallizing some of his gains on winning bets like Apple to safeguard his legacy. He might also be cleaning up his portfolio and setting aside cash in anticipation of Greg Abel, the boss of Berkshire's non-insurance operations, succeeding him as CEO.
David Kass, a finance professor at the University of Maryland who's been following Buffett for nearly 40 years, suggested the investor may be "preparing for the transition to Greg Abel and enabling him to decide how to invest those funds, along with Ted Weschler and Todd Combs," referring to Buffett's two investment managers.
Buffett might also be socking away money because he sees trouble ahead.
"He has a history of selling out of the stock market when the leading economic indicators, inverted treasury yields, and his famous Buffett Indicator are signaling a bear market or a recession is coming," Dietrich said.
Buffett could tap his cash pile to rebuy Apple and other stocks he's sold at a significant discount "after the current nose-bleed stock market highs eventually come back down to earth," Dietrich added.
Whether Buffett is purposely building the Noah's Ark of rainy-day funds because he expects a crash or economic collapse, or has simply been priced out of markets, he's poised to have plenty of firepower to once again scoop up cut-price stocks and businesses if a downturn does materialize.
gfp927z
1 week ago
>>> Buffett’s Berkshire Is Being Packaged Into a Leveraged ETF
Bloomberg
by Miles Weiss and Youkyung Lee
November 12, 2024
https://finance.yahoo.com/news/buffett-berkshire-being-packaged-leveraged-193611168.html
(Bloomberg) -- Warren Buffett created Berkshire Hathaway Inc.’s Class B shares almost 30 years ago to stymie money managers who sought to split the high-priced conglomerate’s stock.
One of South Korea’s largest retail brokerages now plans to package the Class B shares into an exchange-traded fund turbocharged with derivatives, another move that Buffett might not like.
Kiwoom Securities Co. teamed up with Milwaukee-based Tidal Investments to form an ETF designed to provide 200% the daily performance of Berkshire, according to a regulatory filing.
Single-stock ETFs such as this have been sweeping the fund world, using leverage that amps up the potential returns — and losses — of high-flyers such as Nvidia Corp. and Tesla Inc. In South Korea, brokerages such as Toss Securities and Mirae Asset Securities Co. have been seeking to capitalize on rising demand for US stocks amid sluggish performance by domestic equities.
“Traditionally on the leveraged ETFs, the lion’s share of the interest and asset flow has been on the more volatile names,” Gavin Filmore, chief revenue officer for Tidal, said in an interview. “Berkshire is almost the polar opposite.”
Leveraged ETFs are often meant for active traders who want to bet on a stock’s performance for no more than a single day, as these funds typically veer off course when tracking shares over a longer period. The use of derivatives to juice Berkshire returns might not sit well with Buffett, who once called them “financial weapons of mass destruction.”
While Buffett’s firm is a well-known name, it remains to be seen whether day traders will have an appetite to ride a steady stock such as this one with this type of leveraged strategy. Buffett is known as the ultimate long-term investor who advises people to own stocks they’d be comfortable holding for years.
Buffett, 94, and his firm already have a following in South Korea. As of Nov. 8, individual investors in South Korea owned more than $800 million worth of Berkshire Class A and Class B shares, according to data compiled by the Korea Securities Depository.
Asian markets “have a penchant for Berkshire,” said Matthew Palazola, an insurance analyst at Bloomberg Intelligence.
A Kiwoom representative declined to comment. Representatives for Berkshire didn’t reply to a message seeking comment.
Retail investors in South Korea have embraced some of the largest leveraged ETFs listed in the US. The Direxion Daily TSLA Bull 2X Shares, a single-stock ETF for Tesla stock, has taken in $225 million so far this year from South Korean retail investors, raising their total stake in the ETF to $1.2 billion as of Nov. 8, according to depository data.
While Kick BRK 2X Long Daily Target, as it’s known, would be the first Berkshire single-stock ETF in the US, several others trade abroad. Still, they’ve failed to gain much of a following: Leverage Shares 2x Long Berkshire Hathaway ETP Securities, which trades on several European exchanges, only has about $2.3 million of assets.
Kiwoom’s new ETF would buy Berkshire Class B shares and then issue its own stock to investors, potentially at a much lower price than the $467.36 that each Class B share sold for as of market close on Monday. To amplify its exposure to Berkshire’s daily returns, the ETF will enter into swaps with broker dealers and also trade listed options on the Omaha, Nebraska company’s B shares.
The Berkshire ETF would be a Kiwoom product that Tidal runs behind the scenes in exchange for a portion of management fees.
‘Stained Reputation’
Wall Street’s efforts to create an early version of a single-stock fund for Berkshire shares spurred Buffett to create the company’s Class B shares almost three decades ago. At the time, Berkshire had only one class of stock that traded for more than $30,000 a share, and ETFs were in their infancy.
In 1995, Philadelphia politician Sam Katz filed papers to create a unit investment trust, a fund-like vehicle that buys a fixed portfolio of stocks and bonds up front and then holds the securities for a set period. He wrote that the trust would provide “convenient and affordable access to the common stock of Berkshire Hathaway without the requirement to own full shares.”
Berkshire threatened to put the trust out of business by doing a stock split, setting up its own trust or creating a second share class, Katz said in an interview.
Buffett made good on that last threat by issuing Class B shares equal to 1/30th of a Class A share. Investors flocked to the new stock, rendering trusts such as Katz’s obsolete.
In a 1996 letter to shareholders, Buffett warned that such trusts were “expense laden” vehicles that brokers would market “en masse to unsophisticated buyers” in order to earn big commissions. That would have burdened Berkshire “with both hundreds of thousands of unhappy, indirect owners (trustholders, that is) and a stained reputation.”
Katz said he doesn’t have any regrets: “How many guys do you know who get to do battle with Warren Buffett?”
gfp927z
2 weeks ago
>>> Berkshire Hathaway is dumping Apple stock and building its cash stockpile to record highs because Warren Buffett believes the government will raise capital gains taxes soon
Fortune
by Marco Quiroz-Gutierrez
November 4, 2024
https://finance.yahoo.com/news/berkshire-hathaway-dumping-apple-stock-190102086.html
Berkshire Hathaway’s cash reserves are at an all-time high of $325.2 billion as Warren Buffett quickly exits what has been one of his most profitable trades of the past decade.
The Oracle of Omaha and his conglomerate holding company Berkshire started to offload shares of Apple late last year, paring down a major bet on the tech company that it opened in 2016.
Berkshire picked up its selling pace earlier this year and by the end of the second quarter, it had halved its stake in Apple, the Financial Times reported, helping to bring its cash reserve to an all-time-high of $277 billion at the time.
But by the end of the third quarter, Berkshire Hathaway smashed its previous cash record by selling another quarter of its stake in the tech company, or 100 million shares, bringing its total shares to 300 million, down from 400 million.
In just over a year, the company has sold more than two-thirds of its stake in Apple. Although the tech company is still its top holding at $69.9 billion worth of shares, at its peak, Apple made up $178 billion worth of Berkshire Hathaway’s portfolio.
The Apple-selling frenzy comes as Buffett has pared down his equity holdings across the board over the past two years. In the third quarter, Berkshire bought just $1.5 billion worth of stocks, making it a net seller of equities for the eighth consecutive quarter, CNN reported.
Berkshire’s $325.2 billion in cash and short-term treasuries now outweigh the market value of its equities, which stood at $271.6 billion as of the end of the third quarter, according to its most recent earnings report. While some have questioned Berkshire's big stock sales, over the last three years the company has done just fine, with its shares rising 52%, outpacing the S&P 500's 22% increase over the same period.
Part of the reason for the massive equity sale lies in Buffett’s prediction that the capital-gains tax rate will increase over the next several years, possibly to help pay down the federal deficit, which stood at about 122% of the country’s GDP as of 2023.
“I would say with present fiscal policies I think that something has to give and I think that higher taxes are quite likely,” Buffett said during Berkshire’s annual shareholder meeting in May.
Vice President Kamala Harris has said that if elected president, she would raise the corporate tax rate from 21% to 28%. Meanwhile, former President Donald Trump has vowed to cut the corporate tax rate to 15% for companies that produce products in the U.S.
While Buffett said Berkshire Hathaway would retain Apple as its largest investment, he added that he wanted to keep more cash on hand.
“But I don’t mind at all, under current conditions, building the cash position,” Buffett said in May. “I think when I look at the alternative of what’s available in the equity markets and I look at the composition of what’s going on in the world, we find it quite attractive.”
While Buffett said at the May meeting that the capital-gains tax rate, which is paid by investors when they sell an asset like stocks, is likely to rise, he is ultimately not concerned.
“We always hope at Berkshire to pay substantial federal income taxes, we think it's appropriate,” he said.
gfp927z
3 weeks ago
More on OXY - >>> Warren Buffett's $13 billion bet on Occidental Petroleum turns sour as oil prices hit a 3-year low
Business Insider
by Matthew Fox
September 12, 2024
https://finance.yahoo.com/news/warren-buffetts-13-billion-bet-235939676.html
Occidental Petroleum shares have dropped 29% since mid-April, impacting Warren Buffett's stake in the company.
The decline aligns with a 23% drop in crude oil prices on concerns about demand and excess supply.
Berkshire Hathaway's $13 billion stake in Occidental Petroleum may be underwater, based on estimates.
A steady decline in oil prices this year has led to one of Warren Buffett's big stock bets to turn sour.
Shares of Occidental Petroleum have plunged 29% since mid-April and are down 15% year-to-date, trading just above the $50 level on Thursday at 10:04 a.m.
The price decline in Occidental shares has coincided with a 23% decline in crude oil prices since mid-April.
Oil has been under pressure due to demand concerns tied to a cooling US economy and excess supply thanks to record production by US oil firms.
The sharp decline in Occidental Petroleum stock is a blow to Warren Buffett's Berkshire Hathaway, which has been amassing a stake in the oil producer since early 2022.
Buffett went on a buying streak of Occidental Petroleum in June, purchasing millions of shares around the $60 level. The conglomerate owns a 29% stake in the oil company, worth about $13 billion.
The $55-$60 level has acted as a floor for Occidental Petroleum stock since Buffett started buying it in 2022, but for the first time in more than two years, that floor has been taken out.
The hedge fund tracking website HedgeFollowe estimates that Berkshire Hathaway paid an average price of $51.22 for its stake, which is about 1% above the stock's current price.
To be clear, the average price Berkshire Hathaway paid for its Occidental Petroleum stake is only known by Berkshire Hathaway itself.
Another sign that Berkshire Hathaway's Occidental Petroleum bet is souring is based on the warrants it owns to purchase additional shares.
Chris Bloomstran, fund manager of Semper Augustus and longtime investor in Berkshire Hathaway, told Business Insider that Buffett owns warrants to buy another 83.5 million shares of Occidental Petroleum at a strike price of $59.62, which is nearly 20% above the current price.
As to whether Buffett will take advantage of the recent dip in Occidental Petroleum shares and buy, it's possible, according to Bloomstran, but he won't take over the company.
"I wouldn't rule out a purchase of additional shares," Bloomstran said, highlighting that the conglomerate has plenty of "firepower" given its recent sales of Apple and Bank of America stock.
"Warren has said he won't buy the whole company and I don't think he'll change his mind on that," Bloomstran added.
Buffett likely wants to see Occidental Petroleum initiate a stock buyback program of its shares, according to Bloomstran, but Occidental CEO, Vicki Hollub, said the company wouldn't do that until it's paid down a big chunk of its outstanding debt.
On Occidental Petroleum's latest earnings call, Hollub said the firms wants to pay down its debt to $15 billion before initiating a stock buyback, which could be "doable by the end of 2026 or first of 2027."
gfp927z
3 weeks ago
OXY is now below 50, so I wonder if Buffett is still adding to his large position?
>>> Oil Prices Are Falling. Here's Why That's Becoming Less of a Concern for Occidental Petroleum.
by Matt DiLallo
Motley Fool
October 30, 2024
https://finance.yahoo.com/news/oil-prices-falling-heres-why-091400527.html
Occidental Petroleum (NYSE: OXY) is one of the country's largest oil and gas producers. It recently increased its exposure to the oil market by acquiring CrownRock in a $12 billion deal. That acquisition will add $1 billion to the company's annual free cash flow, assuming oil prices average around $70 a barrel. Unfortunately for Occidental, crude prices have recently slumped below that level.
While lower oil prices will affect the company's cash flow in the near term, they'll have less of an effect on its earnings in the future. Here's what's driving its reduced reliance on oil and gas to fuel its results.
Drilling down into how Occidental Petroleum makes money
Occidental Petroleum is a more diversified energy company than many of its peers in the oil patch. In addition to producing oil and gas, Occidental has a chemicals business, called OxyChem, and a midstream and marketing segment. However, the company currently makes most of its money from oil and gas production. For example, Occidental's oil and gas segment produced $1.6 billion of pre-tax income during the second quarter. For comparison, OxyChem's earnings were $296 million, and its midstream and marketing segment's earnings were $116 million.
Higher oil prices helped boost Occidental's earnings during the second quarter. Pre-tax earnings from the oil and gas segment were up $400 million compared to the first quarter, thanks to a 5% improvement in oil prices. The company also got a boost from higher oil and gas production, which exceeded the midpoint of its guidance.
However, oil prices have fallen sharply over the past few months. Crude was recently under $70 a barrel, well below the nearly $80 average it captured during the second quarter. Now the company's earnings and cash flow are likely to decline in the second half of this year.
The path to $1 billion (and beyond)
Occidental is working to mute the impact of oil price volatility by increasing its free cash flow from non-oil components. The company has a clear line of sight to add more than $1 billion of incremental annual free cash flow by the second half of 2026 from areas beyond oil and gas.
For example, its investment in Western Midstream Partners (NYSE: WES) could supply $240 million of incremental cash flow by 2027 as the master limited partnership (MLP) increases its distribution. Western Midstream recently provided investors with a monster raise of 52%, driven by acquisitions, asset sales to strengthen its balance sheet, and organic expansion projects. As the largest investor in the MLP, Occidental receives the lion's share of its lucrative and growing distribution payments.
In addition, Occidental Petroleum is repaying debt as it matures. The company expects to retire $3.7 billion of debt through 2026, which will reduce interest expenses by $180 million. Meanwhile, the company's midstream business has several high-cost contracts nearing expiration. As they expire, they should save the company about $400 million by 2027. Finally, OxyChem is investing heavily in plant enhancements and the modernization and expansion of its Battleground complex. These investments should add about $325 million to its free cash flow total by 2027.
On top of all that, Occidental is building out a carbon capture and storage business (CCS). It's currently constructing the STRATOS project, the world's largest direct air capture (DAC) facility, to extract carbon dioxide from the atmosphere. It expects to complete the project by the middle of next year. The company is commercializing STRATOS by selling carbon credits to customers desiring to offset their emissions. Occidental has several other DAC projects under development. In addition, it's working to develop sequestration hubs to permanently store carbon dioxide. Occidental believes it can eventually make as much money from CCS as it currently does from producing oil and gas.
Growing less reliant on oil
Crude prices are the main factor fueling Occidental's earnings these days. However, oil won't have as much of an impact on the company's earnings in the future. It has a visible path to add an incremental $1 billion to its free cash flow from non-oil sources by the second half of 2026. In addition, it's building out a CCS platform that could be a major future contributor. These catalysts will help reduce the volatility of the company's earnings in the future, which should make it a less risky oil stock.
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bar1080
3 weeks ago
"Profit also rose at the BNSF railroad, which shipped more consumer goods." CPA son is doing well with the Union Pacific shares he's held for several years.
"Union Pacific RR Q Divs
Aug 30, 2024 1.34 Dividend
May 31, 2024 1.30 Dividend
Feb 28, 2024 1.30 Dividend
Dec 7, 2023 1.30 Dividend
Aug 30, 2023 1.30 Dividend
May 30, 2023 1.30 Dividend
Feb 27, 2023 1.30 Dividend
Dec 16, 2022 1.30 Dividend
Aug 30, 2022 1.30 Dividend
May 27, 2022 1.30 Dividend
Feb 25, 2022 1.18 Dividend
Dec 17, 2021 1.18 Dividend
Aug 30, 2021 1.07 Dividend
May 27, 2021 1.07 Dividend
Feb 25, 2021 0.97 Dividend"
gfp927z
3 weeks ago
>>> Berkshire's cash soars to $325 billion, Buffett sells Apple, Bank of America
Reuters
By Jonathan Stempel
November 2, 2024
https://www.reuters.com/markets/us/berkshires-cash-sets-record-buffett-sells-apple-bofa-operating-profit-falls-2024-11-02/
Operating profit falls 6%, no stock buybacks
Net income tops $26 billion on investment gains
More than 600 million Apple shares sold in 2024
Nov 2 (Reuters) - Warren Buffett and Berkshire Hathaway (BRKa), opens new tab extended their retreat from stocks in the third quarter, further slashing holdings in Apple (AAPL), opens new tab 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.
Berkshire has now sold more than 600 million of the iPhone maker's shares in 2024, though Apple remained its largest stock holding, at $69.9 billion.
It sold $36.1 billion of stock overall, including several billion dollars of Bank of America (BAC), opens new tab shares, and bought just $1.5 billion.
That made the quarter the eighth straight where Berkshire was a net seller of stocks.
The Omaha, Nebraska-based conglomerate also conducted no stock buybacks for the first time since the second quarter of 2018, and did not repurchase stock in the first three weeks of October.
"Berkshire is a microcosm of the broader economy," said Cathy Seifert, an analyst at CFRA Research in New York. "Its hoarding cash suggests a 'risk-off' mindset, and investors may worry what it means for the economy and markets."
The Class A shares of Berkshire are up 25% this year, while the Standard & Poor's 500 has risen 20%.
Rising valuations have fueled concerns among some investors that many stocks have become too expensive.
Berkshire's cash stake grew from $276.9 billion at the end of June, and is more than 10 times the $30 billion cushion that Buffett has pledged to maintain.
Buffett has made no major acquisitions of whole companies for his $975 billion company since 2016.
Jim Shanahan, an analyst at Edward Jones in St. Louis, said the swelling cash hoard "begs questions about whether Buffett thinks stocks are overvalued or an economic downturn is coming, or is trying to build cash for a big acquisition."
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 gains would likely grow.
OPERATING PROFIT FALLS
Berkshire's quarterly operating profit declined 6% to $10.09 billion, or about $7,019 per Class A share, missing analyst estimates of $7,611 per share according to LSEG IBES.
The decline stemmed largely from underwriting losses on older insurance policies, insurance claims related to Hurricane Helene in September, 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.
Seifert said Berkshire has long benefited from its diversification but suffered "multi-pronged" weakness in the quarter.
This included a 19% revenue decline at the Pilot truck stop chain, where fuel prices and marketing volumes fell. Berkshire also said "almost all" of its retail businesses, including its more than 80 car dealerships, are seeing revenue declines.
Net income totaled $26.25 billion, compared with a year-earlier $12.77 billion loss, reflecting unrealized gains and losses in stock investments such as Apple.
This adds volatility to net results that Buffett urges investors to ignore, and instead focus on operating performance.
HELENE, MILTON
Profit from insurance underwriting 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.
Shanahan called the policy losses a "big surprise," while Seifert said many of Berkshire's peers have already addressed similar issues. "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.
Investment income at Berkshire's insurance businesses, which hold much of Berkshire's cash, rose 48% to $3.66 billion.
Such gains should decline if the Federal Reserve continues lowering interest rates, or Buffett finds something big worth buying.
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.
Berkshire's operations also include many industrial and manufacturing companies, a big real estate brokerage, and retail businesses such as Dairy Queen and Fruit of the Loom.
On Oct. 31, Berkshire finished purchasing the 8% of Berkshire Hathaway Energy it did not already own.
Buffett, 94, has led Berkshire since 1965. He is expected to eventually transfer leadership to Vice Chairman Greg Abel, 62.
bar1080
4 weeks ago
"Buffett warns of ‘casino-like’ investor behavior. Here’s the hidden cost of ‘free’ investing"
"The landscape of investing has undergone a seismic shift, with the advent of commission-free trading and low-cost ETFs. While this has empowered retail investors, it has also introduced new challenges. Fees have been significantly reduced, but investors now face less visible but equally harmful costs associated with increased risk."
"Buffett’s warning
In today's "free" investing world, many in the finance industry seem bent on distracting investors from this goal. Investors who have not (yet) embraced broad market indexing are being encouraged to trade more actively and take more risk. As Warren Buffett observed, “markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.”"
"This casino-fication of markets can be seen in the explosion of stock options trading volumes, particularly in lottery-like zero-day-to-expiration options, and the glorification of day-trading on online trading platforms that are almost indistinguishable from online gambling sites. All sorts of leveraged, concentrated, and options-based ETFs have come to market, and have attracted hundreds of billions of dollars in short order."
"Double-whammy for active investors
Unfortunately, the bad news for ordinary investors doesn’t stop here. When retail investors take on extra risk, the market participants taking the other side of their active bets are also, on average, taking extra risk. These professional trading firms need to make extra returns to compensate them for the extra risk they’re taking, and the only place that can come from is the pockets of active retail traders. This is a double whammy for active investors—they need to get extra return for the extra risk they take, but instead they wind up with a lower return, because other market participants higher up in the food chain are making extra returns at their expense. While the payment of fees can be thought of as a zero-sum transfer in that one party pays a fee and the other party receives the fee, the cost of taking extra risk is a negative sum phenomenon across all parties.
While the allure of "free" investing is strong, the “risk matters hypothesis” reminds investors to be cautious about the risk associated with deviating from the market. In most cases, the best bet may be to stick with broadly diversified index funds."
This story was originally featured on Fortune.com
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