Warren Buffett’s Berkshire Hathaway sold $133 billion worth of stocks in the first three quarters of 2024. The company trimmed its stake in Bank of America, a significant investment in recent years. At the end of Q3, Berkshire Hathaway’s top four holdings were:
Apple: $69.9 billion
American Express: $41.1 billion
Bank of America: $31.7 billion
Coca-Cola: $28.7 billion
During the 2024 shareholders’ meeting, Buffett said he found it “quite attractive” to build a larger cash position as the stock market continued to rise.
With valuations becoming more expensive, the pool of quality businesses selling at sensible prices is limited. Buffett has not sold a single share of Coca-Cola or American Express in over 25 years. Coca-Cola is one of Berkshire’s longest-held investments, originally bought in the late 1980s.
Despite shifting consumer preferences, the company has driven growth across a large lineup of beverages. Over 2 billion servings of Coca-Cola’s products are consumed every day, resulting in consistent revenue and profits. The stock’s pullback has brought its forward dividend yield to an attractive 3%.
Berkshire is set to make $776 million over the next year from Coca-Cola dividends. American Express benefits from strong brand power, and its cardholders spend more on average than other credit card brands. The company’s spend-centric business model means investors are basically earning a royalty on consumer spending.
Berkshire shifts strategy, raises cash
In Q3, American Express delivered solid financial results, with revenue reaching a new record and growing 8% year over year. The company acquired 3.3 million new customers in Q3, up from 2.9 million in Q3 2023.
The Wall Street consensus has American Express’ revenue growing 9% this year, while earnings should be up an impressive 24%. The stock is trading at 22 times 2024 earnings estimates, which is bordering on the expensive side for a financial services company. Berkshire Hathaway oversees around 50 stocks in its equity portfolio, valued at more than $300 billion.
Buffett is renowned for his buy-and-hold strategy, prioritizing finding and buying quality stocks at fair prices and holding them for the long term. In 2024, Berkshire Hathaway made relatively small investments in Pool Corp. and Domino’s Pizza.
However, a more telling move was Buffett’s decision to sell shares, including a substantial amount in Bank of America, significantly boosting Berkshire’s cash reserves to roughly $325 billion by the third quarter of 2024. Buffett’s investment strategy focuses on buying great companies at reasonable prices and allowing them to grow under their management. With the S&P 500 index near all-time highs, Buffett appears to be waiting for a more attractive market valuation to deploy Berkshire’s substantial cash reserves.
The most critical takeaway from Berkshire Hathaway’s 2024 moves is Warren Buffett’s preparedness for future opportunities. While no one can predict exactly when asset prices will become attractive, Berkshire is ready to make significant investments when the time comes.
