Warren Buffett’s Berkshire Hathaway sold more stocks than it bought in 2024. The company sold $134 billion worth of stocks and only bought $9 billion. This resulted in net sales of $134 billion, a record high for Berkshire.
By the end of the year, Berkshire had $334 billion in cash and equivalents. This was double the amount from the previous year and set a new record. In his annual letter to shareholders, Buffett defended the company’s large cash holdings.
He wrote, “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses.” However, he also said that the company often struggles to find compelling investment opportunities. Berkshire’s operating earnings increased to $47 billion in 2024 from $37 billion in 2023. This metric excludes paper losses and gains on investments that have not been sold.
It is Buffett’s preferred way to measure the company’s performance.
Berkshire builds cash for future opportunities
Buffett’s designated successor, Greg Abel, was praised in the letter for his ability to pick equity opportunities.
Buffett compared Abel to the late Charlie Munger, saying, “Greg has vividly shown his ability to act at such times as did Charlie.”
Some investors and analysts have speculated that Buffett’s conservative moves are not a market call but a preparation for Abel. They believe Buffett is paring outsized positions and building up cash for Abel to deploy in the future. Buffett did indicate that he would be deploying capital in one area: the five Japanese trading houses he began buying nearly six years ago.
He wrote, “Over time, you will likely see Berkshire’s ownership of all five increase somewhat.”
Despite the significant net sales, Berkshire remains heavily invested in the stock market. The company has $272 billion spread across approximately 40 stocks. Buffett’s cautious stance often precedes below-average market years.
Historical data shows that the S&P 500 has had lower returns in the 12 months following years when Berkshire was a net seller of stocks. However, investors should not completely avoid the stock market based on Buffett’s moves. Consistent long-term investment tends to outperform attempts to time the market based on Berkshire’s buying or selling activity.
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