Berkshire Hathaway Amasses Record Cash Stockpile

Berkshire Hathaway, the conglomerate led by Warren Buffett, reported a 40% increase in its operating earnings for the third quarter of 2023, as well as a record-high cash balance of $157 billion.

The company, which owns businesses ranging from insurance to railroads to candy, said on Saturday that its operating income rose to $10.8 billion, up from $7.7 billion in the same period last year. The increase was driven by a strong performance from its insurance underwriting segment, which posted a profit of $2.4 billion, compared to a loss of $1.1 billion a year ago.

Berkshire also benefited from higher interest rates, which boosted its insurance investment income to $2.5 billion, up from $1.4 billion last year. The company has largely parked its cash in short-term Treasuries, which have seen their yields rise as the Federal Reserve has signaled a possible tapering of its bond-buying program.

However, Berkshire also reported a net loss of $12.8 billion, compared to a loss of $2.8 billion in the third quarter of 2022. The loss was mainly due to investment losses of $23.5 billion, which reflected the changes in the market value of its stock portfolio. Berkshire owns stakes in companies such as Apple, Bank of America, Coca-Cola and Verizon.

Berkshire’s cash pile, which has been a source of frustration for some investors who have urged Mr. Buffett to deploy it more aggressively, reached a new high of $157.2 billion at the end of September, up from $147.4 billion at the end of June. Mr. Buffett has said that he prefers to have at least $20 billion in cash on hand at all times, and that he is looking for “elephant-sized” acquisitions that can enhance Berkshire’s long-term value.

However, such deals have been scarce in recent years, as Mr. Buffett has faced stiff competition from private equity firms and other buyers who have been willing to pay higher prices. In the absence of attractive opportunities, Berkshire has resorted to buying back its own shares, spending $1.1 billion on repurchases in the third quarter, and $7 billion in the first nine months of the year.

Berkshire has also diversified its investments geographically, increasing its stakes in five major Japanese trading companies to an average of 8.5% each, up from 5% last year. The move has paid off, as Japan’s stock market has soared to 33-year highs, boosted by the economic recovery and the political transition following the resignation of Prime Minister Yoshihide Suga.

Berkshire’s Class A shares, which trade at over $400,000 apiece, have risen 14% this year, slightly trailing the S&P 500 index, which has gained 16%. The company’s Class B shares, which trade at a fraction of the Class A shares, have performed similarly. Berkshire is scheduled to hold its annual meeting in Omaha, Nebraska, in May 2024, where Mr. Buffett, 93, and his longtime partner, Charlie Munger, 99, are expected to address shareholders and answer questions.

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