Berkshire Hathaway, led by the legendary Warren Buffett, has taken an unprecedented approach to cash reserves in the third quarter of 2024, reaching a new record of $325.2 billion. This accumulation follows a significant reduction in Berkshire’s Apple holdings, marking a cautious shift by Buffett and signaling Berkshire’s heightened focus on liquidity during a time of market uncertainty. Alongside these financial maneuvers, Berkshire reported a 6% drop in quarterly operating profit, as challenges in its extensive insurance businesses weighed on overall performance.
In its latest quarterly report, Berkshire disclosed that it had sold approximately 100 million Apple shares over the summer, trimming its holdings in the iPhone maker by 25%. Despite the reduction, Apple remains Berkshire’s largest individual stock investment, with an impressive remaining value of $69.9 billion as of the close of the quarter. This sale was part of a larger, strategic stock reduction totaling $36.1 billion, which also included the sale of significant holdings in Bank of America, reflecting Buffett’s awareness of potential tax changes and the impact of capital gains. Although Buffett has suggested Apple will remain a core holding, the stock sale underscores Berkshire’s carefully calibrated strategy to ensure tax efficiency and optimal portfolio balance.
Even as Berkshire navigated these changes, operating profit across its diverse businesses saw a modest decline, down to $10.09 billion from $10.76 billion a year earlier. A substantial driver of this decline stemmed from increased insurance liabilities, exacerbated by losses from Hurricane Helene and an adverse currency environment as the U.S. dollar strengthened. The insurance sector’s results were further impacted by the ongoing settlement of bankruptcy claims related to former talc supplier Whittaker Clark & Daniels. These developments contributed to a sharp 69% decline in insurance underwriting profit. Nonetheless, Berkshire’s flagship auto insurer, Geico, enjoyed a near doubling of its own underwriting profits, bolstered by a reduction in accident claims and lowered expenses—a testament to the company’s risk management and operational improvements.
Meanwhile, Berkshire’s rail and energy segments offered a counterbalance to the challenges in insurance. BNSF Railway, one of Berkshire’s largest subsidiaries, reported a strong quarter driven by increased consumer goods shipments. Berkshire Hathaway Energy also posted an uptick in profit as it saw a decline in operational costs, supporting Berkshire’s overall financial resilience. The fourth quarter, however, is expected to reflect additional pre-tax losses of up to $1.5 billion from Hurricane Milton, which made landfall in Florida in October, creating further challenges for Berkshire’s insurance underwriting business.
On the earnings front, Berkshire saw a remarkable rebound in net income, recording $26.25 billion, or $18,272 per Class A share, compared to a loss of $12.77 billion, or $8,824 per share, during the same period last year. This substantial improvement can be attributed to recovering market values of Berkshire’s investment portfolio, even as Buffett continues to emphasize the importance of operating profits as a stable performance metric. In his long-standing philosophy, Buffett urges investors to ignore the volatility of reported net income caused by unrealized investment gains and losses, which accounting rules require Berkshire to report each quarter.
At 94, Buffett remains at the helm of Berkshire, with a succession plan in place for Vice Chairman Greg Abel, age 62, who is expected to eventually take on Berkshire’s leadership. Since Buffett began steering the conglomerate in 1965, Berkshire has expanded its reach across a diverse array of industries. The Omaha-based company owns a wide range of businesses, from consumer retail brands like Dairy Queen and Fruit of the Loom to a large real estate brokerage, Berkshire Hathaway Energy, and numerous industrial enterprises. As Berkshire heads into the final quarter of 2024 with a massive cash reserve, its strategy reflects a cautious yet adaptable approach to the evolving economic landscape.
