Genius investor Warren Buffett’s continued hoarding of cash and selling of stocks continues to stoke fears of a potential market crash that could hammer 401(k)s.
The cash and Treasury bills being held at the Oracle of Omaha’s famed company Berkshire Hathaway has risen above $300 billion in the third quarter.
The Wall Street Journal report that these holdings are a record for the Nebraska-based firm.
For Berkshire Hathaway, to be holding lots of cash is typical but the recent scale in buildup has caused a stir among observers of the conglomerate.
The company is preparing to hand over Buffett’s annual letter to shareholders this week, which will hint at what he thinks of the current state of the stock market.
The shareholders also should see how he plans to spend his hordes, and will be privy to how much cash was held at the end of last year.
Steven Check, chief investment officer of Check Capital Management, told the WSJ: ‘The issue is, what are they going do with all this cash? This is as extreme as I can recall.’
Berkshire Hathaway generates money from its operating business which include insurer Geico, battery maker Duracell and restaurant chain Dairy Queen.
Just last week, Buffett also saw that the company offloaded billions of dollars in stock in DaVita, a dialysis provider.
As Buffett continues to horde cash and sell off large portions of stock, it could point to him fearing a potential crash in the market, spelling disaster for working Americans who have their 401(K) tied to the success of the stock market.
The cash and Treasury bills being held at the Oracle of Omaha’s famed company Berkshire Hathaway has risen above $300 billion
As Buffett continues to horde cash and sell off large portions of stock, it could point to him fearing a potential crash in the market
Even though Berkshire sold 203,091 shares, it still owns 45 percent of DaVita. The stake, valued at $6.4 billion, has been part of Berkshire’s portfolio since 2011.
The large sell is becoming repeat behavior, with Berkshire being a net seller of equity securities in the past eight quarters.
Thousands of investors follow and mirror his market moves, which can send individual stock prices over a cliff.
James Shanahan, a senior equity research analyst at financial advisers Edward Jones, added: ‘I hear that from our advisers: Why should we be buying stocks if Warren Buffett’s not buying stocks?’
The outlet said that observers think that the rise in cash is likely linked to Buffett being after high-quality businesses in industries that he understands.
Prices are just too high for him and his company to feel confident that their investment would actually lead to a worthwhile return for them.
They are scouring the markets for bargains as stocks trade at record highs, with the S&P 500 hitting its latest all-time high on Wednesday.
The US stock index also recently traded at 22.4 times its projected earnings over the next year, above a 10-year average of 18.6.
Traders work on the floor of the New York Stock Exchange (NYSE) during morning trading on March 13, 2023 in New York City
Cars pass in front of Kiewit Plaza, the location of Berkshire Hathaway Inc. headquarters, in Omaha, Nebraska, U.S., on Thursday, April 11, 2013
At the most recent annual meeting at Berkshire, Buffett made a comment on the stockpiles of cash being kept by the company.
He said: ‘We’d love to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money.
‘We only swing at pitches we like. It isn’t like I’ve got a hunger strike or something like that going on. It’s just that things aren’t attractive.’
Holding so much cash has also allowed them to report $8 billion in interest, along with $3.8 billion in income from dividends.
According to the WSJ, Buffett’s cash buildup could be stemming from his sales of Apple stock, that has traded well in recent years than when Berkshire held stocks from 2016 to 2018.
They slashed their stake in tech giant for four consecutive quarters that started in late 2023, reducing their ownership from six to two percent.
Berkshire then held off on further sales of the company, with its stock now worth a total of $75 billion to the company as of the end of last year.
Shanahan believes that these efforts could also be part of the 94-year-old chief deciding to step away from the company, providing a smooth transition to his successor Greg Abel.
Shanahan added: ‘Some might say that this is housekeeping, that he’s cleaning everything up and getting ready to hand over the company.
‘He would want to give Greg Abel a good starting point and not have any legacy problems.’
Berkshire has also not purchased any of its own stock back in the third quarter for the first time in years.
Their stock rallied to start the year, with both its Class A and Class B shares closing at records this week. The market value passed $1 trillion for the first time ever last year.
