Berkshire Hathaway just erased nearly two-thirds of its lag behind the S&P 500 last week, climbing 4.5% as investors dumped AI names and circled back to companies that actually make money. The rally came after a strong third-quarter earnings report dropped over the weekend, while the Nasdaq cratered 3%, marking its largest weekly fall since April.
The renewed interest in Warren Buffett’s company arrived at a time when markets started worrying that AI plays are too expensive and the U.S. economy might be weakening. According to Barron’s, the rally in Berkshire’s stock cut its underperformance versus the S&P 500 to 4.3 percentage points from 12.2 points as of October 29.
### Berkshire’s Operating Income Surges on Insurance Profits
Berkshire’s operating income surged by 34% to nearly $13.5 billion in Q3, driven mainly by a 200% increase in profit from insurance underwriting.
### Buffett Holds Buybacks, Piles Up Record Cash
Despite the strong quarter, Warren Buffett didn’t greenlight any stock buybacks, signaling that he still doesn’t see Berkshire Hathaway shares as cheap, even after months of trading well below their May highs. With no cash spent on repurchasing its own shares, and with the company selling off more stocks than it bought, Berkshire’s total cash balance reached $381.7 billion at the end of September — a 10.9% increase from June.
When subtracting BNSF Railway’s cash and adjusting for the timing of some Treasury bill purchases, the cash pile still sits at $354.3 billion, up 4.3% over the same stretch.
### Possible Preparations for Warren Buffett’s Departure
Warren Buffett might also be preparing to step away. On Monday, November 10, Berkshire Hathaway is scheduled to release a press statement that will include a message from him about philanthropy, Berkshire, and “other matters that shareholders may find to be of interest.” The company confirmed this to The Wall Street Journal and in a news release last week.
No one is calling it a farewell, but the signs are there. If Warren exits now, he’d be leaving with the company flush with cash, outperforming again, and cutting its reliance on overhyped equities.
### Apple and Bank of America Trimmed as Portfolio Reshuffle Continues
Next Friday, investors will receive a full breakdown of Berkshire’s Q3 portfolio, but there are already signs that Warren Buffett and his team have been selling down major holdings.
Last Saturday’s 10-Q filing showed a $1.2 billion drop in cost basis for the company’s consumer stock category, which includes Apple. Apple rallied 24% during the quarter, making it a prime candidate to cash in profits.
Despite still being Berkshire Hathaway’s largest equity holding — now worth $75.2 billion — the company has cut its Apple position by 69% over the past two years.
Barron’s broke down the $1.2 billion decline, dividing it by Apple’s per-share cost basis of $35. That math points to a sale of about 35 million shares, which would have brought in around $8 billion based on Apple’s average Q3 price of $230 per share.
Apple wasn’t the only holding trimmed. The rest of Apple’s reported $12.4 billion in Q3 equity sales leaves $4.4 billion possibly tied to another name: Bank of America. Buffett has been unloading that stake as well.
Since the beginning of 2024, Berkshire has cut its Bank of America holding by 40%, though it remains the company’s third largest public equity holding at $32.2 billion.
### Significant Holdings Remain in the U.S., Japan, and Hong Kong
Berkshire’s publicly disclosed holdings in the U.S., Japan, and Hong Kong remain substantial. Two Japanese companies, Itochu and Mitsubishi, are exceptions. Those figures are based on data from March 17 and August 28, respectively, with Japanese share prices converted to U.S. dollars.
### State Street Sticks with AI Trade Despite Tech Investors Taking Profits
Meanwhile, State Street continues to back AI investments, even as tech investors take profits. Anna Paglia, the company’s Chief Business Officer, told CNBC’s “ETF Edge” last week that momentum isn’t dead.
“How would you not want to participate in the growth of AI technology?” she said. “Everybody has been waiting for the cycle to change from growth to value. I don’t think it’s happening just yet because of the momentum.”
Anna added that “the rebalancing trade is not going to happen until we see a signal from the market indicating a slowdown in these big trends.”
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