The cautious stance began in 2022, when the Federal Reserve launched its most aggressive rate-hike campaign in four decades to curb inflation, in a tightening that crushed valuations but still failed to lure Buffett from the sidelines. Even as the Fed later moved to cut rates and AI stocks drove the market to record highs, Berkshire remained defensive.
Money sky high
While Berkshire’s stock portfolio has shrunk, its pile of cash has soared. The company’s cash rose to $382 billion at the end of September, while operating profit rose 34% to $13.5 billion, led by a nearly tripling of underwriting profit to $2.4 billion.
At the same time, Berkshire’s net investment income fell 13% to $3.2 billion as short-term interest rates fell. Much of the money has flowed into U.S. Treasury bonds, a haven that reflects Buffett’s patience and skepticism about lofty market valuations.
The structure reflects Buffett’s characteristic discipline: only buy when bargains appear. But with shares near record highs, private equity firms offering takeovers and even Berkshire stock still trading high despite recent falls, few opportunities fit its price tag.
A twilight deal
Still, Buffett found room for one last swing. In October, Berkshire agreed to buy Occidental Petroleum’s chemicals division, OxyChem, for $9.7 billion, the largest deal since purchasing insurer Alleghany in 2022. The move deepens Berkshire’s nearly 30% stake in Occidental and could mark the last major deal of Buffett’s storied career.
The Oct. 2 announcement quoted Greg Abel, not Buffett, indicating the quiet transition already underway at Berkshire’s top leadership.
A difficult exit
Buffett’s decision in May to step down as CEO after nearly six decades sent shock waves through Wall Street. Berkshire’s Class B shares, which had hit a record high of $540 before the announcement, have since fallen 12%, while the S&P 500 has risen 20% to new highs.
Buffett transformed Berkshire from a struggling textile mill he acquired in 1965 into a $1 trillion conglomerate that includes insurance, railroads, utilities and consumer brands, while amassing major stakes in Coca-Cola and American Express.
As Abel prepares to take over in January, Buffett will remain chairman, but his successor will inherit a company sitting on a pile of cash, a cautious investment stance and expectations shaped by six decades of extraordinary returns.
Also read | Berkshire trails S&P by the widest margin this year as Apple’s sale costs Warren Buffett billions
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