by Wolf Richter, Wolf Street:
“You could conclude this is another sell signal. This was a far higher level of selling activity than we were expecting”: Edward Jones Investments.
Q2 was the seventh quarter in a row during which Berkshire Hathaway, Warren Buffett’s investment vehicle, shed stocks on net, this time a net of $76 billion in stocks. The proceeds went into T-bills, which grew by $81 billion, a blistering pace for a three-month period – to get out of Dodge? The stock market turned south in mid-July
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Cash is king.
During Q2 through June 30, Berkshire Hathaway piled on an additional $81 billion in T-bills, according to Berkshire’s Q2 earnings release on Saturday. Its T-bill holdings:
- Q2 2024: $235 billion
- Q1 2024: $153 billion
- Q4 2023: $130 billion
- Q1 2022: $67 billion, when interest rates began to rise,
If Berkshire earned an average of 5.3% on its T-bills in Q2, that would be about $3 billion in interest income with zero risk, accounting for roughly 8% of its pre-tax net income of $38 billion.
Total cash – so T-bills, cash, and cash equivalent – jumped by $88 billion during Q2, to $277 billion, up from $189 billion in Q1 2024, having now more than doubled since Q1 2023 ($130 billion).
Buffett had said at the shareholder meeting in May that it was “a fair assumption” that Berkshire’s total cash and T-bill pile would exceed $200 billion by the end of Q2, and that he was “quite satisfied” with that position. And that has come to pass by a wide margin – with cash and T-bills having ballooned to $277 billion. Cash is king.
Clearly, Buffett took risk off the table and locked in profits, and collected 5%-plus interest on his ballooning cash.
Ditching Stocks.
Berkshire dumped on a net basis $75 billion of stocks in Q2.
Apple holdings took a massive hit. Berkshire dumped nearly half (roughly 390 million shares) of its remaining Apple shares in Q2 after having dumped 13% (116 million shares) in Q1, and about 1% (10 million shares) in Q4. Berkshire’s Apple holdings are now down to about 400 million shares, from 908 million shares that it had held two years ago.
This Apple trade has been huge and hugely profitable for Berkshire. It first disclosed purchasing Apple in 2016 when the shares were in the $26-range, give or take. On Friday, Apple closed at $219.86 a share.
The super-hyped event that Buffett was buying Apple in large amounts and kept buying Apple, and kept praising Apple, was in part responsible for driving up the price of Apple shares not only through the actual buying pressure from Berkshire, but also through the media hype that came with it.
Ditching Bank of America. In July through August 1, reported in separate filings and not included in the Q2 quarterly report, Berkshire also sold 8.8% (or about $3.8 billion) of its Bank of America holdings in a series of transactions.
“You could conclude this is another sell signal,” Jim Shanahan, an analyst at Edward Jones who covers Berkshire, told Reuters. “This was a far higher level of selling activity than we were expecting.”
In terms of Berkshire’s overall stock holdings at the end of Q2, about 72% were concentrated in five stocks:
- Apple: $84.2 billion
- Bank of America: $41.1 billion
- American Express: $35.1 billion
- Coca-Cola: $25.5 billion
- Chevron: $18.6 billion.
Share buybacks grind down.
Berkshire repurchased just $345 million of its own shares in Q2, compared to share buybacks of $2.57 billion in Q1. Perhaps Buffett doesn’t deem the shares a good deal anymore, after they soared by 44% since the beginning of 2023.
Investment income drops, operating income rises.
Earnings from the companies that Berkshire owns (operating income) rose by 15% year-over-year to $11.6 billion, even as revenue inched up only 1% to $93.6 billion. Almost half of that profit came from its insurance empire, including GEICO, whose massive increases in premiums – what consumers have been complaining about for two years – and now reduced claims caused underwriting profits to more than triple!
