Warren Buffett’s Berkshire Hathaway reported record profits and cash reserves in its latest annual report. However, the 94-year-old CEO did not explain why he has been selling more stocks and growing the company’s cash pile to a staggering $334 billion. In his annual letter to shareholders, Buffett emphasized that this defensive stance does not represent a move away from his love for stocks.
Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities,” he wrote. Berkshire’s substantial cash reserves have raised questions among investors and analysts, especially as interest rates are expected to fall from their multi-year highs. Some have grown impatient with the lack of action and have sought an explanation.
Buffett stated that Berkshire will continue to prefer equities to cash, particularly American equities, although many of these companies will have significant international operations. “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned,” he wrote. Despite this, Berkshire net sold equities for a ninth consecutive quarter in the final period of last year, mainly due to the shrinking of its two largest equity holdings.
Berkshire cautious despite bullish market
The company sold more than $134 billion worth of stocks in 2024. Meanwhile, Berkshire continued its buyback halt, repurchasing no shares in the fourth quarter or the first quarter through Feb.
10, despite a massive increase in operating earnings. Buffett remains cautious amid a bull market that has seen the S&P 500 gain more than 20% for two years and move into the green again this year. Some cracks have developed in the past week, with concerns growing about a slowing economy, volatility from rapid policy changes from new President Donald Trump, and overall stock valuations.
In his letter, Buffett endorsed designated successor Greg Abel’s ability to pick equity opportunities, even comparing him to the late Charlie Munger. “Greg has vividly shown his ability to act at such times as did Charlie,” Buffett said. Some investors and analysts have speculated that Buffett’s conservative moves last year are not a market call. Still, he prepared the company for Abel by paring outsized positions and building up cash for him to deploy one day.
Buffett signaled that he would be deploying capital in one area: the five Japanese trading houses he had begun buying nearly six years ago. “Over time, you will likely see Berkshire’s ownership of all five increase somewhat,” he wrote.
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