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Berkshire Hathaway’s cash pile rose to a record $157 billion in a quarter in which Chief Executive Warren Buffett continued to sell shares in publicly traded companies as the so-called Oracle of Omaha noted a lack of attractive investments.
The company sold more than $5 billion in U.S. and foreign stocks in the third quarter, according to results released Saturday. The sales brought Berkshire’s disposal of publicly traded shares to nearly $40 billion last year.
Investors will have to wait another two weeks to see how Buffett has adjusted Berkshire’s portfolio. But results filed Saturday showed the company sold more than 12 million Chevron shares before buying Hess for $53 billion in an all-stock deal last month.
The value of Berkshire’s stock portfolio shrank to $319 billion from $353 billion at the end of June, a decline caused by the decline in the broader stock market as investors became convinced that the Federal Reserve would keep interest rates on hold for longer would hold high.
This has weighed on the valuations of listed companies and prompted some portfolio managers to look to bond markets for better returns. The value of Berkshire’s stake in Apple alone fell by more than $20 billion as the iPhone maker’s shares fell 12 percent in the three months to the end of September.
Buffett’s investment moves are being watched closely by fund managers and the general public alike for clues as to where the 93-year-old investor sees attractive returns.
He diverted the proceeds from stock sales, as well as the cash flows generated by Berkshire’s many companies, into cash and Treasury bills. The company’s cash pile rose by nearly $10 billion during the quarter to a record $157.2 billion, a sum that gives it impressive acquisition clout.
Berkshire has been a big beneficiary of rising U.S. interest rates, which have risen above 5 percent this year. The company said interest income it earned from its insurance investments rose to $1.7 billion in the three-month period and increased to $5.1 billion over the last 12 months. That exceeded the total interest Berkshire earned on its cash reserves over the past three years combined.
“Interest rates are attractive here and it seems like it’s a hurdle or a disincentive to deploy cash when you can earn 4 percent risk-free,” said Jim Shanahan, an analyst at Edward Jones. “I would guess that the cash balance probably continues to increase from here.”
Buffett said the company repurchased $1.1 billion of Berkshire shares in the quarter, up from $1.4 billion in the second quarter. However, the filing showed that purchases increased in August and again in September, a sign that the billionaire investor believed the company’s shares were undervalued.
The company’s operating divisions, which include BNSF railroad, Geico insurer and aircraft parts maker Precision Castparts, reported a 41 percent increase in profits to $10.8 billion. Gains were driven by the insurance division, which reported strong underwriting profits of $2.4 billion, offsetting weakness at BNSF and provisions for losses related to wildfire litigation against its utility.
Ajit Jain, a Berkshire executive vice chairman who oversees the insurance business, told shareholders at its annual meeting in May that the company had bet heavily on the Florida insurance market and underwritten policies in the hurricane-hit state.
It was a risky bet that Jain estimated could cost Berkshire as much as $15 billion if the state were hit by strong storms. But this year the state experienced a relatively quiet season.
Berkshire reported Saturday that significant catastrophe losses – individual insured losses exceeding $150 million – reached just $590 million in the first nine months of the year. That figure is down from $3.9 billion in the same period last year, when Hurricane Ian devastated Florida.
The company’s Geico auto insurer, which has had major problems paying out claims over the past two years, showed improvement. The unit has shed more than two million policyholders this year and cut its advertising budget as it focuses on insurance deals it believes can benefit.
Outside of the insurance sector, Berkshire’s gains underscored the uneven economic growth that has confounded economists and much of the investing world. Sales declined at the company’s apparel and footwear manufacturers, which include Fruit of the Loom, and its real estate-related businesses, which continued to face weaker demand due to high mortgage rates. BNSF also reported lower rail transport volumes.
However, NetJets, the company’s part-owner of private jets, reported an increase in demand from wealthy customers, and car dealerships reported rising sales of new vehicles.
“The theme emerging this earnings season is that lower-end consumers are starting to show cracks, that they may not have much excess liquidity and that they are feeling the pressure of higher costs,” Shanahan added.
Berkshire also detailed the ongoing impacts of the 2020 and 2022 wildfires that spread across California and Oregon. The company took a $1.4 billion charge during that period for payouts that its utility will likely have to make to people who lost their homes in the fire, bringing the total cost of the wildfires to $2. 4 billion US dollars increased.
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Berkshire has warned that the final payouts could be far higher; In Oregon alone, plaintiffs sought $8 billion in damages.
The decline in the company’s stock portfolio, which is reflected in Berkshire’s income statement, weighed on overall results. The company reported a net loss of $12.8 billion, or $8,824 per Class A share, compared with a net loss of $2.8 billion a year ago.
Buffett has long called the net income numbers meaningless, saying the numbers could be “extremely misleading to investors who have little or no understanding of accounting rules.”