Berkshire Hathaway’s Cash Reserves Reach New Heights Amid Sliding Sales Growth
Berkshire Hathaway Inc. revealed its cautious stance towards the market, with its cash reserves hitting a record high of $381.7 billion. This comes even as profits in Warren Buffett’s final report—before he steps down as CEO—showed positive growth.
For the twelfth quarter in a row, Buffett’s conglomerate has sold more shares than it has purchased, all within a portfolio valued at $283.2 billion, which includes names like Apple and American Express.
Interestingly, the company hasn’t bought back any of its own shares, and while its stock has lagged behind the overall market, there haven’t been any buybacks in the last five quarters. Operating profit climbed 34% to $13.49 billion in the third quarter, which surprisingly outperformed analysts’ projections. This was buoyed by reduced losses in insurance, and net income also rose 17% to $30.8 billion. However, the sales growth paled in comparison at just 2%, trailing the broader U.S. economy.
Factors like economic uncertainty and waning consumer confidence have hindered progress. Sales growth has cooled for companies under Berkshire’s umbrella such as Clayton Homes, while profits have dipped for brands like Duracell, Fruit of the Loom, and the toy maker Squishmallows. Kathy Seifert, an analyst at CFRA Research, remarked that Berkshire, often viewed as a reflection of the U.S. economy, hasn’t quite kept pace. “Investors will have a hard time finding momentum in this stock,” she noted.
Transition of Leadership
As Buffett, now 95, prepares to conclude his 60-year stint as CEO by the end of the year, he’s steadily accumulating cash. Greg Abel, 63, his vice chairman, is set to take over but Buffett will continue as chairman. There’s some curiosity about how Abel, perceived as a more practical manager, will handle the company’s cash reserves. Possibilities may include paying out Berkshire’s first dividend since 1967.
Additionally, Berkshire intends to allocate $9.7 billion in cash to acquire Occidental Petroleum’s oxychem chemicals business, a deal unveiled earlier this month. Analyst James Shanahan from Edward Jones expressed disappointment at the company’s hesitancy to spend more in this year’s market rally, suggesting it might ultimately reflect poorly on long-term prospects.
Operating income reached $13.49 billion, translating to approximately $9,376 per Class A share, up from $10.09 billion in the same quarter last year. Interestingly, foreign exchange fluctuations made up more than 40% of this increase.
The lack of significant disasters such as hurricanes also aided performance, although Geico’s profits dropped due to increased advertising costs. With lower interest rates likely affecting income from cash reserves, Berkshire’s insurance sector could face challenges.
Despite these ups and downs, BNSF Railway reported a 6% rise in profits, thanks to lower fuel costs and better employee productivity. However, Berkshire Hathaway Energy saw profits dip by 9%, attributed to legal expenses from wildfires and increased costs associated with their natural gas pipelines in the UK.
There’s ongoing analysis about how recent legislative changes, like the One Big Beautiful Bill Act, could impact renewable energy projects under Berkshire’s umbrella. Notably, net income surged to $30.8 billion or $21,413 per Class A share, showing an increase from $26.25 billion the previous year.
Investors have voiced some concerns surrounding Berkshire’s future direction amid changes in leadership, leading to a decline in share prices. Since Buffett announced his plan to step down, the stock price has dropped 12%, notably trailing the S&P 500 by 32 percentage points. Over 2025, Berkshire is still lagging behind the index by 11 points.
Tom Russo of Gardner, Russo & Quinn remarked that some restless investors believe Berkshire should accelerate their investments or they might start to look elsewhere. Despite this, he maintains that Berkshire is “very well positioned” for future growth. Highlighting Buffett’s investment philosophy, Russo mentioned that the company wouldn’t deploy capital unless it adds to its intrinsic value.
Berkshire Hathaway oversees nearly 200 companies spanning various sectors, including well-known consumer brands like Dairy Queen and See’s Candies. The company hasn’t made a significant acquisition since 2016, when it purchased aerospace parts maker Precision Castparts for $32.1 billion.
Shanahan concluded that Abel has a significant opportunity ahead, with plenty of cash on hand and a reputation for effective management, which could enhance the performance of Berkshire’s existing operations.
