Sell-off and growing cash pile suggests Buffett may be souring on the U.S. economy or believes stock market valuations have gotten too high.
Warren Buffett’s Berkshire Hathaway has posted a record quarterly operating profit and boosted its cash holdings to nearly $277 billion after selling roughly half its stake in Apple.
Buffett’s cash stake jumped from $189 billion in the first quarter to a record $276.9 billion in the three months ending on June 30, largely because Berkshire sold a net $75.5 billion of stocks in the quarter, including about half its stash of Apple shares.
Despite cashing in a big part of his Apple shares, Buffett said at Berkshire’s May 4 annual meeting that he remains a fan of the iPhone maker and that he expects Apple to remain Berkshire’s largest stock investment.
Roughly three-quarters of Berkshire’s aggregate fair value at the end of the second quarter was concentrated in Apple ($84.2 billion) and four other companies: American Express ($35.1 billion), Bank of America ($41.1 billion), Coca-Cola ($25.5 billion), and Chevron ($18.6 billion).
Berkshire’s net stock sales of $75.5 billion in the April–June period marks the seventh straight quarter that the company sold more stocks than it bought.
That, combined with Berkshire’s growing cash pile, suggests that Buffett, one of the world’s most revered investors, may be souring on the U.S. economy or believes stock market valuations have gotten too high.
Most of the cash ($271.5 billion) was held in Berkshire’s insurance arm, which generated roughly half of the company’s profits. The other $5.4 billion in cash was in Berkshire’s railroad, utilities, and energy division.
Alongside cashing in more of its stock holdings, Berkshire has also been spending less cash to buy back its own stock, repurchasing just $345 million in the second quarter.
Buffett said at the May 4 annual meeting that Berkshire would “love to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money.”
Despite hitting a record $11.6 billion in quarterly operating profit, Berkshire’s revenue rose just 1 percent to $93.65 billion in the April–June period.
Net income fell 15 percent to $30.34 billion from $35.91 billion a year earlier, as rising stock prices in both periods boosted the value of Berkshire’s investment portfolio.
Berkshire’s Class A shares closed Friday’s session at $641,435, up 18 percent so far this year.
That a represents better performance than the benchmark S&P 500, which is up 12 percent year-to-date.