Berkshire cuts Apple stake in half and increases cash to $277 billion, even with record operating profit

By Jonathan Stempel

(Reuters) – Warren Buffett appears to have soured on stocks, letting Berkshire Hathaway’s cash pile rise to nearly $277 billion and selling about half his stake in Apple even as the conglomerate posted a record quarterly operating profit.

Berkshire’s results suggest that the 93-year-old Buffett, one of the world’s most respected investors, is increasingly wary of the broader U.S. economy or stock market valuations that have become too high.

The results were released on Saturday after a stock market selloff that pushed the Nasdaq into correction territory, while a weak jobs report raised concerns about U.S. economic activity and whether the Federal Reserve waited too long to cut interest rates. fees.

“If we look at the entire Berkshire picture and the macroeconomic data, a safe conclusion is that Berkshire is getting defensive,” said Cathy Seifert, an analyst at CFRA Research who rates Berkshire a “buy.”

Cash holdings grew to $276.9 billion as of June 30, from $189 billion three months earlier, largely because Berkshire sold a net $75.5 billion worth of shares in the quarter. It was the seventh consecutive quarter that Berkshire sold more shares than it bought.

Berkshire sold about 390 million Apple shares, in addition to the 115 million shares sold from January to March, with Apple’s share price rising 23%. It still owned about 400 million shares worth $84.2 billion as of June 30.

Second-quarter profit from Berkshire’s dozens of businesses rose 15% to $11.6 billion, or about $8,073 per Class A share, from $10.04 billion a year earlier.

Nearly half of that profit came from Berkshire’s insurance business, including more than triple the underwriting profit at auto insurer Geico.

But revenues rose just 1% to $93.65 billion and were virtually unchanged at large companies such as BNSF railroad and Berkshire Hathaway Energy.

Net income fell 15% 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, including Apple.

Buffett has long urged shareholders to ignore Berkshire’s quarterly investment gains and losses, which often lead to outsized net profits or net losses.

BUFFETT WANTS TO SPEND, BUT DOESN’T SPEND

Berkshire commits to keeping a minimum of $30 billion in cash, but often lets it accumulate when it can’t find entire companies or individual stocks to buy at fair prices.

Your returns from short-term Treasury bonds, however, are expected to decline once rate cuts begin.

Berkshire is also using less money to buy back its own shares, repurchasing just $345 million in the second quarter and none in the first three weeks of July.

The story continues

“We’d 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,” Buffett said at Berkshire’s May 4 annual meeting, referring to The Money from Berkshire.

Berkshire did not immediately respond to a request for comment Saturday.

Buffett remains a big fan of Apple, reflecting the iPhone maker’s strong pricing power and committed customer base.

He said at the meeting that he expected Apple to remain Berkshire’s biggest stock investment, but selling made sense because the 21% federal tax rate on earnings would likely increase.

Since mid-July, Berkshire has also sold more than $3.8 billion in Bank of America shares, its second-largest equity holding.

Buffett has led Berkshire, based in Omaha, Nebraska, since 1965, transforming it into a conglomerate with dozens of companies, including many industrial and manufacturing companies, a large real estate brokerage, Dairy Queen and Fruit of the Loom.

Vice Chairman Greg Abel, 62, is expected to eventually succeed Buffett as Berkshire’s chief executive.

GEICO’S SUBSCRIPTION PROFIT TRIPLES

Quarterly insurance profit rose 54% to $5.58 billion, benefiting from more investment income and Geico’s ability to charge higher premiums even as drivers file fewer claims.

BNSF’s profit fell 3% as the railroad set aside more money for lawsuits, offsetting lower operating costs and greater transportation of agricultural and consumer products.

The lawsuits also weighed on Berkshire Hathaway Energy, where profit fell 17% because of utility unit PacifiCorp, which many home and business owners blame for causing wildfires in Oregon in 2020.

PacifiCorp set aside $2.7 billion for wildfire losses as of June 30, up from $2.4 billion three months earlier, and said losses could grow significantly.

Berkshire’s Class A shares closed Friday at $641,435. They are up 18% this year, while the Standard & Poor’s 500 is up 12%.

(Reporting by Jonathan Stempel in New York; Editing by Ira Iosebashvili, Jason Neely and Diane Craft)