According to Barron’s report, Berkshire sold about $12.4 billion worth of stock in the three months ended in September, while buying back only $6.4 billion. That made the company a $6 billion net seller, continuing its run from recent quarters.
Despite Buffett’s long-standing reputation as a buyer of long-term value, Berkshire’s reluctance has persisted for three years now. The company has sold more shares than it bought every quarter since 2022, indicating a continued defensive mindset. The last time Berkshire sat on such a pile of cash was during the early years of the pandemic.
In addition, Berkshire did not repurchase any of its own shares for the fifth consecutive quarter. The absence of buybacks – once a favorite tool for deploying excess cash – indicates that Buffett, and incoming CEO Greg Abel, see limited near-term upside in the company’s valuation.
“If you feel like stocks are expensive, including your own, you will eventually be right, but you could be wrong for a long time,” James Shanahan of Edward Jones told Reuters.
Still, the quarter was far from weak. Operating profit rose 34% year-on-year to $13.49 billion, beating expectations, while net profit rose 17% to $30.8 billion, helped by lower underwriting losses and currency gains. Berkshire’s auto insurance unit Geico reported higher costs, likely due to more advertising, but BNSF’s rail business saw profits rise 6%, benefiting from lower fuel prices and better efficiency. However, the energy business suffered a 9% decline in profits, which was hit by legal costs related to forest fires and cost overruns at utilities. Berkshire’s cash and stock decisions are closely read as clues to its view of the markets. The company’s stock portfolio – valued at about $283 billion – remains anchored by large holdings, both of which have delivered outsized returns over the years. But the steady selling streak suggests that Buffett’s team sees limited value in the current market rally, especially with U.S. interest rates still high and earnings growth uneven.
This quarter also comes close to a symbolic shift at Berkshire. At the age of 95, Warren Buffett will hand over the reins of CEO to Vice Chairman Greg Abel, who will take charge at the end of the year while Buffett remains as chairman. Abel, 63, is seen as a more hands-on entrepreneur, and investors are watching to see how he will manage Berkshire’s vast liquidity.
The company has already committed $9.7 billion to purchase Occidental Petroleum’s chemical unit, a rare large-scale purchase, but that also raises the question of how to deploy the company’s cash supply. Some expect Abel could eventually consider Berkshire’s first dividend since 1967, although such a plan has not yet been confirmed.
Berkshire’s reluctance to spend even during a market rally could reflect great caution, not only when it comes to valuations, but also when it comes to the sustainability of U.S. expansion.
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