The mystery behind Warren Buffett’s uncharacteristically defensive position grew over the weekend.
The 94-year-old CEO of Berkshire Hathaway sold more stocks in the most recent quarter, increasing his record cash pile to $334 billion. However, he did not provide an explanation in his eagerly awaited annual letter as to why the investor, who has a reputation for making wise equity purchases over the years, appeared to be drying up.
Rather, Buffett stated that this stance did not signify a departure from his passion for equities.
"Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities," Buffett stated in his 2024 annual letter, which was released on Saturday. "That preference won't change."
Berkshire's massive cash holdings have sparked concerns among shareholders and onlookers, especially as interest rates are forecast to decline from multi-year highs. In recent years, Berkshire's CEO and chairman has expressed unhappiness with an expensive market and little buying possibilities. Some investors and experts have gotten frustrated with the lack of action and have sought an explanation.
Buffett stated that despite his recurrent stock sales, Berkshire will continue to choose equities over cash.
Buffett remarked, "Berkshire shareholders can be confident that we will always allocate a significant portion of their funds in stocks – primarily American stocks, though many of these will have significant international operations." "Cash-equivalent assets will never be preferred by Berkshire over good businesses, whether they are fully or partially owned."
The Omaha-based conglomerate net sold stocks for a ninth straight quarter in the last quarter of last year, according to the company's annual report, which was also made public on Saturday. It appears that shareholders will have to wait a little longer.
The total value of Berkshire's stock sales in 2024 exceeded $134 billion. This is mostly because Apple and Bank of America, Berkshire's two biggest equity holdings, have shrunk.
Buffett doesn't seem to be finding his own shares appealing either. Through February 10, Berkshire maintained its buyback ban, without repurchasing any shares in the first or fourth quarters.
This is the case even though the company announced a huge boost in operating earnings on Saturday.
"A lot of the time, nothing looks appealing."
In the midst of a booming bull market that has seen the S&P 500 gain over 20% for the past two years and enter the green this year, Buffett is sitting on his hands. The past week has seen the emergence of some fractures, meanwhile, as worries about a slowing economy, volatility brought on by President Donald Trump's swift policy moves, and market values in general have grown.
Over the past two years, Berkshire's stock has increased by 25% and 16%, respectively, and is up 5% so far this year.
Buffett may have hinted in the letter that stock valuations were a problem.
Buffett wrote, "We invest in either type of equity vehicle based on where we can best deploy your (and my family's) savings. We are impartial in our choice of equity vehicles." "We rarely find ourselves knee deep in opportunities; frequently, nothing looks compelling."
Buffett did commend designated successor Greg Abel in this year's letter for his aptitude at selecting equity opportunities, even drawing comparisons to the late Charlie Munger.
Frequently, nothing appears appealing; we seldom ever find ourselves surrounded by opportunity. Buffett remarked, "Greg has clearly demonstrated his capacity to act at such times as did Charlie."
Buffett shocked everyone at last year's annual meeting when he revealed that Abel, vice-chairman of non-insurance operations, would have the last word on all of Berkshire's investment choices, including managing the company's portfolio of publicly traded stocks.
Buffett's cautious actions over the past year, according to several analysts and investors, are not a market call; rather, they are his way of getting the business ready for Abel by reducing large holdings and accumulating cash that he may eventually use.
Buffett did indicate that he would be allocating funds to the five Japanese trading companies he started purchasing about six years ago.
He said, "You will probably notice a slight increase in Berkshire's ownership of all five over time."
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