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Berkshire Hathaway’s cash pile swelled to a record $189bn in the first quarter of 2024 as Warren Buffett’s sprawling conglomerate continued to dump stocks.
The figure underscores the difficulty the billionaire investor and his team have had in trying to find worthwhile investments, as well as the relative allure of the high yield on US government debt.
The company on Saturday disclosed it had sold just under $20bn-worth of stocks in the first three months of the year, buying $2.7bn over the same period. The value of its stock portfolio as a result slipped to $336bn from $354bn at year end.
The figures come as Berkshire shareholders gather in Omaha, Nebraska, for the company’s annual meeting, dubbed the Woodstock of capitalism. It is the first time Buffett will take the stage since his longtime business partner Charlie Munger died in November.
Berkshire reported solid earnings in the first quarter, driven almost entirely by improvements in its insurance businesses as well as a boost from higher interest rates. Operating profits across the company jumped 39 per cent from the year before to $11.2bn.
The company disclosed that its auto insurer Geico had passed along higher rates to customers and had suffered fewer claims, lifting its results. The unit has scaled back its footprint since the pandemic after it suffered a period of losses.
Auto insurers across the US had struggled with the high replacement costs of new cars, exacerbated by supply chain issues and surging inflation.
Geico, which is led by one of Buffett’s top investment deputies, cut millions of policies in a drive to return to profitability. The move has been successful. Pre-tax profits at Geico more than doubled from a year ago to $1.93bn. The unit also signalled its retrenchment could be near its end, saying that “the rate of decline” had slowed and it was winning new business.
The company has also benefited from the US Federal Reserve’s decision to raise interest rates in a bid to quell inflationary pressures. Berkshire said it earned $1.9bn in the quarter in interest income from its cash pile, which is largely invested in short-term Treasuries.
Over the past year, it has earned almost $7bn on that portfolio.
Overall, Berkshire said it generated a net profit of $12.7bn in the first quarter, down 64 per cent from $35.5bn a year earlier.
Buffett has long discouraged his shareholders from relying on the company’s net income figures — calling them “meaningless” — as they are affected by swings in value of its stock portfolio from quarter to quarter. It can result in huge losses or profits that do not reflect the underlying business performance.