Berkshire Hathaway, led by Warren Buffett, is preparing to announce its third-quarter earnings. The company's cash reserve rose to an unparalleled $277 billion in Q2, a jump of almost $100 billion from Q1. Around $235 billion of this increase is invested in U.S. Treasurys.
Investors are eager to learn how Berkshire intends to use or invest this substantial cash cache. Will new positions be announced by Buffett, or will the firm use the funds to buy back shares, as it has done previously?
Reflecting earlier this year, Buffett stated that few U.S. companies were aligned with the firm's value-centric investment and acquisition strategy. Several significant equity holdings have been significantly reduced by the company since his remarks.
Catherine Seifert, CFRA’s Berkshire analyst, foresees the firm pursuing “transactions as it deploys part of its $277B cash hoard (as of June 30, 2024) amid a declining interest rate environment.”
Despite a reduction this year, Apple Inc. most likely remained Berkshire’s largest equity share in the Q3, whereas Buffett continued to reduce his long-standing stocks-Bank of America. Berkshire has diminished its Bank of America share by approximately 20% to 800 million shares in Q3, according to SEC filings. The company has continued to sell its stock, bringing Berkshire's stake in the bank below 10%, therefore the firm is no longer obliged to immediately disclose adjustments to its stance.
Moreover, Berkshire has significantly invested in Sirius XM, with Buffett reportedly being a keen listener to the Frank Sinatra channel.
In a recent complex split-off transaction, Sirius XM and Liberty Media, who held tracking shares of Sirius XM, created a new entity. Berkshire, having previously owned Sirius XM and the tracking shares, now has approximately 105 million shares in the new Sirius XM entity. With an increase confirming more than a third of all available Sirius XM shares.
Investors are keen to learn whether Buffett has adjusted his other notable holdings during the quarter. During the second quarter, new stakes were unveiled in Ulta Beauty (ULTA) and Heico Corp. (HEI).
Buffett has traditionally preferred to examine operating income over traditional earnings metrics to efficiently ascertain the state of Berkshire’s businesses.
In Q2, operating income rose to $11.6 billion, primarily due to underwriting and investments in its insurance businesses. The insurance business prospered as claim and catastrophe-related costs were reduced.
The magnitude of claims and disaster-related losses, and the prognosis for the insurance business, will be under examination on Saturday, given the rising number of substantial hurricanes in the Southeast in recent months.