Billionaire investor Warren Buffett’s Berkshire Hathaway recorded a record amount of cash in the third quarter of $157 billion.
Berkshire Hathaway on November 4 announced third-quarter operating profit of 10.8 billion USD, up 40% over the same period last year. The company’s cash and cash equivalents also reached a record of more than 157 billion USD, up from 147.4 billion USD in the previous quarter.
Most of Berkshire’s money is held as short-term investments in US government bonds. In the report, the company said its interest income increased by $1.3 billion in the third quarter compared to the same period last year, mainly due to rising short-term interest rates.
Warren Buffett at the Berkshire Hathaway Shareholders Meeting. Photo: Reuters
This year Berkshire actively bought US government bonds, despite Fitch Ratings lowering the US credit rating from AAA to AA+. On August 3, Warren Buffett – Chairman and CEO of Berkshire – said on CNBC that they bought $10 billion in US government bonds that week alone. “The only question for next Monday is whether we will buy 10 billion USD in 3-month or 6-month terms,” he said.
The huge amount of cash raises questions about whether Buffett will find an attractive business to buy. Charlie Munger, Berkshire Vice Chairman, said in a recent Wall Street Journal interview that the likelihood of Berkshire having a major M&A deal while both men are in office is “at least 50%.”
However, Berkshire had a net loss of 12.8 billion USD, much higher than 2.8 billion USD in the same period last year. Investment losses were $23.5 billion last quarter, up from $10.4 billion in the same period last year.
Buffett said operating profits more closely reflect the company’s business performance. The reason is that according to accounting rules, Berkshire will have to record the estimated losses/gains of the investment portfolio when announcing net profits. Therefore, a declining stock market will put pressure on overall business results, even though Berkshire’s core segments are still performing well.
The US stock market’s upward momentum slowed in the third quarter, as government bond yields soared, giving investors better opportunities to make profits. The S&P 500 index fell 3.6% in the third quarter.
Apple’s largest stock investments also lost value. Apple dropped 12% in the third quarter. American Express lost 14%, Coca-Cola fell 7% and Bank of America dropped 4.6%.
In contrast, Berkshire’s insurance segment brought in a profit of $2.4 billion. Last year, this segment lost 1.1 billion USD. Rising car insurance premiums and falling claims have helped the segment become profitable.
Berkshire also bought $1.1 billion in treasury shares in the third quarter, bringing the total number of shares it bought back since the beginning of the year to $7 billion.
