Berkshire’s cash soars, operating profit falls

(Reuters) — Warren Buffett and Berkshire Hathaway extended their retreat from stocks in the third quarter, further slashing holdings in Apple and boosting cash to a record $325.2 billion.

Berkshire said in its quarterly report released Saturday that its operating profit declined 6% to $10.09 billion, or about $7,019 per Class A share, missing analyst estimates of $7,611 per share according to LSEG IBES.

The decline stemmed largely from underwriting losses on older insurance policies, insurance claims related to Hurricane Helene in September, and currency losses from a strengthening U.S. dollar.

These offset improved profitability at the Geico car insurer, where accident claims fell. Profit also rose at the BNSF railroad, which shipped more consumer goods, and Berkshire Hathaway Energy, where operating expenses declined.

Profit from insurance underwriting fell 69%, dented by losses from older policies, $565 million from Helene, and a bankruptcy settlement tied to a defunct talc supplier. This more than offset a 93% jump in Geico’s underwriting profit.

Berkshire also projected $1.3 billion to $1.5 billion of pretax losses in the fourth quarter from Hurricane Milton, which slammed into Florida in October.

Investment income at Berkshire’s insurance businesses, which hold much of Berkshire’s cash, rose 48% to $3.66 billion.

Such gains should decline if the Federal Reserve continues lowering interest rates, or Mr. Buffett finds something big worth buying.

Berkshire said it sold about 100 million, or 25%, of its Apple shares over the summer, ending with about 300 million. It has now sold more than 600 million of the iPhone maker’s shares this year, though Apple remained its largest stock holding at $69.9 billion.

It sold $36.1 billion of stock overall, including several billion dollars of Bank of America  shares. That made the quarter the eighth straight in which Berkshire was a net seller of stocks.

The Omaha, Nebraska-based conglomerate also conducted no stock buybacks for the first time since the second quarter of 2018, and did not repurchase stock in the first three weeks of October.

Mr. Buffett has made no major acquisitions of whole companies for his $975 billion company since 2016.

Jim Shanahan, an analyst at Edward Jones in St. Louis, said the swelling cash hoard “begs questions about whether Buffett thinks stocks are overvalued or an economic downturn is coming, or is trying to build cash for a big acquisition.”