Berkshire Hathaway’s latest earnings report reveals a cautious stance taken by Warren Buffett as he approaches his retirement. Released on a weekend, the report indicates a significant increase in the company’s cash reserves, which soared to an all-time high of $381.6 billion, up from $347.7 billion earlier in the fiscal year. This bolstering of cash is particularly notable as it aligns with Buffett’s historical investment strategy, which seems to indicate a lack of compelling opportunities in the current market climate.
One striking aspect of the report is Berkshire’s decision not to repurchase any shares during the quarter, marking a consistent trend as the conglomerate has been a net seller of stocks for twelve consecutive quarters. Despite this cautious approach, Berkshire did complete a significant acquisition by purchasing Occidental Petroleum’s petrochemical unit, OxyChem, for $9.7 billion—the company’s most substantial deal since 2022.
The earnings figures paint a robust picture for the conglomerate, which includes well-known subsidiaries such as Geico and BNSF Railway. Operating earnings rose a remarkable 34 percent year-over-year, reaching $13.49 billion, while net income climbed 17 percent to $30.8 billion. A significant factor contributing to these results was an impressive increase of over 200 percent in insurance underwriting during the quarter.
As Buffett prepares to retire at the end of the year, the transition to his successor, Greg Abel, looms large. Buffett, who has been at the helm for six decades, has publicly endorsed Abel numerous times. However, the company’s stock has experienced a 12 percent decline since Buffett’s announcement of his retirement plans during the shareholder meeting in May, underperforming against the S&P 500. This stock performance raises questions about the “Buffett premium,” which appears to be fading.
Nonetheless, historical data indicates that Berkshire has outperformed the market consistently over the past decade, with Buffett’s leadership characterized by exceptional success over extended periods. The change in leadership and market conditions appears to be a pivotal moment for the company, as shareholders keenly await confirmation of Abel’s capabilities to lead Berkshire into the future. The sentiment among investors suggests a lingering need for reassurance regarding the company’s direction in the wake of Buffett’s storied tenure.
