Warren Buffett's Berkshire Hathaway disclosed in its third-quarter earnings report on Saturday that the legendary investor has been selling more stocks than he's acquired, with his departure as CEO anticipated by the close of the year.
TL;DR
- Warren Buffett's Berkshire Hathaway has been a net seller of stocks for three consecutive years.
- Berkshire Hathaway's cash reserves hit an all-time high of $382 billion, with funds redirected to Treasury securities.
- Greg Abel is set to become CEO of Berkshire Hathaway, with Buffett stepping down by year-end.
- Berkshire Hathaway agreed to acquire Occidental Petroleum's chemical division for nearly $10 billion.
In the most recent period, the conglomerate divested $12.5 billion in stock while acquiring $6.4 billion, signifying the twelfth straight quarter of net stock sales. Later this month, more detailed information regarding specific stocks will be released in a separate regulatory filing.
Berkshire's cash reserves reached an all-time high of $382 billion, driven by a 34% surge in operating earnings, as Buffett refrained from repurchasing stock for the fifth consecutive quarter.
With the company's stock holdings diminishing, funds have been redirected towards Treasury securities. Berkshire's net investment income for the third quarter saw a 13% decrease, falling to $3.2 billion, a trend attributed to the recent decline in short-term interest rates.
Investors adopted a hesitant approach to the stock market starting in 2022, prompted by The Federal Reserve's initiation of its most substantial interest rate increases in over four decades, aimed at curbing inflation.
The increased interest rates caused stock values to drop significantly, yet it seems this decline wasn't substantial enough to pique Buffett's interest in finding a good deal. Following the Fed's subsequent shift to lowering interest rates, a rally ensued, propelling stocks to unprecedented levels.
The significant market downturn in April, triggered by President Donald Trump's surprising tariff announcement, also didn’t get Buffett off the sidelines. Berkshire Hathaway divested $3 billion worth of stocks on a net basis during the second quarter.
AI-focused firms spearheaded a rapid market recovery, reaching new peaks within months. In contrast, Berkshire Hathaway's stock has declined by 12% since May, the month Buffett revealed that he will step down as CEO by year-end and would transfer his responsibilities to Greg Abel.
Buffett is anticipated to remain chairman, but he might avoid significant actions to pave the way for Abel, who was already assuming bigger leadership role responsibilities prior to May.
Last month, Berkshire Hathaway has reached an agreement to acquire the chemical division of major oil company Occidental Petroleum. Was finalized for almost $10 billion, possibly signifying the final major transaction of his career. This move is also expected to enhance Berkshire's stake, which currently stands at almost 30%, in the parent firm, Occidental.
The October This acquisition, the largest by Berkshire since its 2022 purchase of insurer Alleghany, marked the first time Berkshire's announcement quoted Abel without naming the current chief executive.
It's brilliant. Last month, Doug Leggate, a Wolfe Research energy analyst, informed Fortune that this is undoubtedly a significant advantage for Berkshire, as it also benefits the company in which they hold a 30% stake. “It’s completely self-serving, it’s logical, and—not in any nefarious way—definitely helpful.”