Jamie Spencer
Berkshire Hathaway shares surged nearly 4% on Monday after Warren Buffett’s conglomerate reported a 71% increase in operating earnings for the fourth quarter. The company’s operating profit, which includes earnings from wholly owned businesses like Geico and BNSF Railway, rose to $14.5 billion, driven by a 302% jump in insurance underwriting profits.
Investment Gains Slow as Cash Pile Grows
Despite the surge in operating earnings, Berkshire’s investment gains from its portfolio holdings slowed significantly to $5.2 billion from $29.1 billion in the year-earlier period. The company sold more equities than it bought for the ninth consecutive quarter, bringing total equity sales to over $134 billion in 2024. Notably, Berkshire reduced its holdings in Apple and Bank of America, its two largest equity investments.
As a result of the selling spree, Berkshire’s cash reserves grew to a record $334.2 billion, up from $325.2 billion at the end of the third quarter.
Buffett’s Perspective on Cash and Investments
In his annual letter, Warren Buffett addressed the record cash position, emphasizing that it did not indicate a lack of interest in buying stocks or businesses. “Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities,” Buffett wrote. “That preference won’t change.”
He suggested that high valuations were the reason for his cautious approach, stating, “Often, nothing looks compelling.” Buffett also expressed confidence in his successor, Greg Abel, praising his ability to identify equity opportunities.
Share Buyback and Investor Sentiment
Berkshire halted its share buyback program, repurchasing zero shares in the fourth quarter and in the first quarter of 2025 through February 10. This pause in buybacks has left some investors and analysts impatient for more action, while others trust Buffett’s conservative strategy to position Berkshire for future opportunities.
Bill Stone, chief investment officer at Glenview Trust Company and a Berkshire shareholder, commented, “Shareholders should take comfort in knowing that the firm continues to be managed to survive and emerge stronger from any economic or market downturn by being in a financial position to take advantage of opportunities during a crisis.”
Stock Performance and Market Outlook
Berkshire Hathaway had a strong 2024, with shares rallying 25.5% and outperforming the S&P 500, marking its best performance since 2021. The stock is up more than 5% so far in 2025, reflecting investor confidence in Buffett’s long-term approach despite short-term caution.
