Berkshire Hathaway’s cash pile has reached a staggering record of $276.9 billion, surpassing its previous high of $189 billion. This substantial increase is attributed to Warren Buffett’s strategic selling of stock holdings, including a significant portion of Apple shares, in the second quarter. The Oracle of Omaha has been on a selling spree for seven consecutive quarters, with the second quarter being a particularly active period where he offloaded more than $75 billion in equities, bringing the total for the first half of the year to over $90 billion.
Despite the substantial selling of stocks, Berkshire Hathaway’s operating earnings witnessed a notable increase in the second quarter. Thanks to the strong performance of its fully-owned businesses, such as auto insurer Geico, operating earnings surged to $11.6 billion, marking a 15% rise from the previous year. Geico, which Buffett once referred to as his “favorite child,” saw a remarkable leap in underwriting earnings to nearly $1.8 billion, more than tripling the figure from a year ago.
Warren Buffett, who is nearing 94 years old, expressed his willingness to deploy capital during Berkshire’s annual meeting in May. However, he cited high prices in the market as a deterrent, stating that he would only invest in businesses that offer minimal risk and significant profit potential. Despite the substantial cash reserves, the conglomerate only repurchased $345 million worth of its own stock in the second quarter, a stark decrease from the previous two quarters where $2 billion was repurchased.
The buoyant stock market, driven by optimism surrounding technological innovation, has raised concerns among investors about inflated valuations in the technology sector. The recent surge in the S&P 500 index has been fueled by expectations of lower inflation and interest rate hikes by the Federal Reserve. However, signs of a slowing economy, coupled with disappointing job reports and market volatility, have sparked worries among investors.
While Geico reported robust earnings growth, other segments of Berkshire Hathaway’s business exhibited mixed results. BNSF Railway maintained its profitability level at $1.6 billion, while the utility business under Berkshire Hathaway Energy faced a decline in earnings to $326 million due to potential wildfire liability concerns. The conglomerate’s net earnings also dipped to $30.3 billion in the second quarter, reflecting a decrease from the previous year’s figure.
Berkshire Hathaway’s mounting cash pile presents a complex dilemma for Warren Buffett as he navigates through market uncertainties and strives to identify lucrative investment opportunities. Despite the conglomerate’s strong operating performance, uncertainties surrounding the economy and market valuations may impact its investment decisions in the near future. Warren Buffett’s cautious approach to capital deployment underscores the challenges of managing a sizeable cash reserve in a volatile market environment.