Berkshire cash pile could top $200 billion after Buffett sells shares | Wilnesh News

Berkshire HathawayCash reserves under intense scrutiny could exceed $200 billion – more than entire banks Hungary’s annual gross domestic product — Chief Executive Warren Buffett made a rare selloff of some of his favorite stocks.

The Omaha-based conglomerate is likely to say when it reports second-quarter earnings on Saturday morning that its cash reserves will surpass the record $189 billion set in the first quarter. Berkshire’s results come as Buffett has been selling off winning investments. apple, Bank of America and BYDleading some to believe that the Oracle of Omaha is increasingly concerned that the bull market is overheating.

“It does look like he wants to de-risk the portfolio a little bit,” Bill Stone, chief investment officer of Glenview Trust and a Berkshire shareholder, said earlier this week. “He’s offloading two of his top holdings, none. There is nothing more sensitive to the economy than banks. The market seems very certain of a soft landing right now, and maybe he’s taking a more contrarian view.”

Berkshire Hathaway has been a net seller of the stock for six consecutive quarters. Notably, Buffett cut his huge bet on Apple by 13% in the first quarter for tax reasons after making huge gains. The sell-off may resume in the second quarter, as the iPhone maker’s stock has gained 23% in the period.

Meanwhile, in a surprising move, the group recently began dumping shares of Bank of America, its second-largest holding after Apple. Berkshire Hathaway has sold $3.8 billion of stock in the Charlotte-based bank over the past 12 trading days. (Bank of America’s sales begin in July and will not be reflected in the second-quarter report.)

Buffett’s vast sum of money has been earning handsome returns as U.S. Treasury yields soared over the past two years, but his growing cash hoard could again raise questions as interest rates fall from multi-year highs. If invested in three-month Treasury bills at an interest rate of about 5%, $200 billion in cash would generate about $10 billion per year, or $2.5 billion per quarter, but those returns will decline once the Fed starts lowering interest rates.

“The question is just how long they can hold on,” Andrew Kligerman, a Berkshire analyst at TD Cowen, said in an interview, referring to Berkshire’s massive cash pile.

“Things are not attractive”

Buffett, who turns 94 at the end of the month, admitted at Berkshire Hathaway’s annual meeting in May that he was willing to invest more capital, but high oil prices made him hesitant.

“I think it’s a reasonable assumption that (cash holdings) will probably be around $200 billion by the end of the quarter,” the investing icon said at the time. “We’d love to spend it, but we’re not going to spend it, Unless we think (a business) is doing something that has very little risk and can make us a lot of money…it’s not like I’m on a hunger strike or anything like that going on, it’s just…things are not attractive.

Weaknesses in non-insurance areas

Investors will also closely study Berkshire’s quarterly results BNSF Railway and Berkshire Hathaway Energy The utilities business has shown signs of weakness recently. BNSF is grappling with rising wages and falling revenue, while BHE is under pressure to take responsibility for damage from wildfires.

“The non-insurance side will impact the results, whether it’s subdued rail volumes coupled with rising labor costs, or utilities, which could lead to a good quarter, but given the liability exposure, no one is excited about it,” TD said Cowen’s Kligerman, who recently initiated coverage of Berkshire with a hold rating.

On the contrary, Berkshire’s insurance business is a bright spot, with insurance underwriting profits increasing by 185% year-on-year in the first quarter.

Berkshire shares were up more than 21% this year as of Thursday, outpacing the S&P 500’s 14% return. The group’s market capitalization has soared to $956 billion, putting it on the verge of joining a handful of U.S. stocks with a market capitalization of $1 trillion or more.