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| Warren Buffett is the CEO of Berkshire Hathaway. Reuters |
Warren Buffett’s Berkshire Hathaway has once again trimmed its stock portfolio, selling a net $3 billion in equities last quarter marking the company’s 11th straight quarter as a net seller of stocks. The development comes as the legendary investor, nearing his 95th birthday, prepares to pass the torch to longtime successor-in-waiting Greg Abel.
In Berkshire’s latest earnings report, operating profits fell 4% year-over-year to $11.2 billion, a modest decline that still underscores the conglomerate’s immense earning power. Yet it also reflects growing challenges across parts of the business including weakening insurance underwriting results and an $877 million hit from foreign currency exchange losses tied to non-dollar debt. That’s a significant reversal from the $446 million foreign exchange gain the company reported in the same period last year.
While earnings from core operations like BNSF Railway, Berkshire Hathaway Energy, and the company’s vast manufacturing, service, and retail segments remained strong, they weren’t enough to offset headwinds in insurance and currency impacts.
Selling Continues as Cash Reserves Soar
The most eye-catching figure in the report might not be the profit decline, but rather Berkshire’s growing mountain of cash, which now sits at an eye-popping $344 billion. That’s more than the market capitalization of Coca-Cola or Bank of America two of Berkshire’s longtime stock holdings.
Last quarter, Berkshire bought $3.9 billion in equities but sold $6.9 billion, indicating a cautious stance amid what Buffett has often called a richly valued market. It's a continuation of the company’s conservative investment strategy of recent years, driven by the lack of appealing buying opportunities in both public markets and private businesses.
Buffett has previously commented on high valuations making it difficult to deploy capital effectively. In recent years, Berkshire has scaled back key holdings, including Apple and Bank of America further contributing to the swelling cash position.
Kraft Heinz Write-Down Adds a Jolt
One of the more surprising notes in the earnings release was a $5 billion write-down of Berkshire’s 27% stake in Kraft Heinz, reducing the company’s carrying value to $8.4 billion. While impairments are not unusual in Buffett’s empire of long-term investments, the size of the writedown turned heads.
David Kass, a finance professor at the University of Maryland and longtime Buffett watcher, described the earnings as largely “business as usual” except for the Kraft Heinz adjustment, which he called “surprising.” Kass speculated it may be linked to Buffett’s approaching departure, suggesting the valuation adjustment could reflect a changing perspective as the leadership transition nears.
No Buybacks This Quarter
Notably, Berkshire didn’t repurchase any of its own shares last quarter a departure from previous periods when Buffett aggressively bought back stock amid what he deemed undervaluation. The decision to forgo buybacks may reflect Berkshire’s high stock price earlier in the quarter or Buffett’s increasingly conservative approach during this leadership handoff phase.
The pause in repurchases also reinforces the notion that Buffett sees limited attractive uses for capital, even when it comes to his own company's shares a striking statement in an era of rampant corporate buybacks.
Buffett’s Final Chapter Draws Near
With Buffett officially naming Greg Abel as his successor at the company’s annual meeting in May, the market is beginning to price in a future without the "Buffett premium" the extra value investors attribute to the Oracle of Omaha’s presence.
Since that announcement, Berkshire Hathaway shares have underperformed the broader S&P 500, a reversal from earlier in the year when the stock was beating the index. Some market analysts believe that part of Berkshire's stock value was rooted in Buffett’s personal mystique and legendary track record an intangible edge that may gradually fade as leadership changes.
Still, the transition appears well-planned and deliberate. Abel, who oversees all non-insurance operations, has long been groomed for the top job and is expected to continue Buffett’s core philosophies of discipline, patience, and long-term value investing.
A War Chest and a Legacy
As Berkshire Hathaway enters the final chapter of the Buffett era, the company sits in a position of unparalleled financial strength with record cash reserves, a diversified group of operating businesses, and a global reputation for financial prudence.
Yet challenges loom. High market valuations have stifled Berkshire’s appetite for big-ticket acquisitions. Insurance underwriting remains vulnerable to natural disasters and rising claim costs. And the transition from Buffett’s singular presence to a team-led future under Abel and others will be closely watched by investors worldwide.
For now, Berkshire is playing defense building its war chest, paring back exposure, and waiting for opportunities that meet its high bar for value. If history is any guide, Warren Buffett’s final moves as CEO will be cautious, calculated, and ultimately consistent with the philosophy he’s championed for nearly six decades: “Be fearful when others are greedy, and greedy when others are fearful.”
