Warren Buffett's Berkshire Hathaway saw operating profit fall more than expected in the third quarter. On Saturday, the conglomerate also revealed another hefty cut to its Apple stake, surprising the markets while sending its cash holdings to record levels. Buffett halted Berkshire stock buybacks. Berskhire Hathaway stock and Apple stock both slid further below key support on Monday.
Tech titan Apple is among the biggest holdings in Berkshire Hathaway's stock investment portfolio. But Berkshire slashed its position in the iPhone maker nearly in half in Q2 and by a further 25% in Q3.
Berkshire Hathaway Earnings
In Q3, Berkshire Hathaway earnings fell 6% on an operating basis vs. a year earlier to $to $10.09 billion. Analysts had expected a 1% decline in operating earnings for the quarter, according to FactSet.
The company's operating earnings rose about 16% in Q2 and 40% in Q1, fueled by insurance underwriting and insurance interest income. Net income fell over both those quarters.
Warren Buffett advises investors to focus on operating earnings, which show how the various businesses that Berkshire actually runs are doing. Net income includes stock investment gains or losses, which can be volatile, skewing the financial picture.
In addition to major insurance businesses, including Geico, Berkshire Hathaway owns utilities, BNSF railroad and more.
Berkshire stock lost 2.1% in Monday's stock market trading. Shares further undercut the 50-day moving average and the lows of a flat base with a 484.2 buy point, according to MarketSurge pattern recognition.
Shares of Apple stock lost 0.4% on Monday, extending last week's slide below the 50-day support level.
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Share Buybacks, Cash Levels
In Q3, Berkshire Hathaway didn't buy back any of its own stock. That compares with share repurchases worth $345 million in Q2 2024, $2.6 billion in Q1 2024 and $2.2 billion in Q4 2023.
Buffett is a legendary value investor. Over the first nine months of 2024, he scaled back Berkshire stock buybacks as shares rose.
Warren Buffett Sells More Apple Stock
Berkshire Hathaway sold 100 million Apple shares in Q3, leaving it with 300 million shares. That's according to the company's 10-Q, which came out on Saturday along with the earnings release.
"The scale of the Apple sales comes as a bit of a shock," Bill Stone of Glenview Trust Company, a longtime Buffett watcher, wrote in a note to clients on Monday. "Buffett said at the (May) annual meeting that Berkshire's holdings of American Express and Coca-Cola were 'wonderful' businesses but said Apple is an even better one."
On the back of Apple stock sales, Berkshire's cash hoard swelled by about $48 billion to $325.21 billion. The growing cash pile also reflected the $10.1 billion in operating profit and the lack of any Berkshire buybacks. Berkshire's cash levels had soared to $277 billion in Q2 from $189 billion in Q1.
Buffett was asked at a May annual shareholders meeting why Berkshire was maintaining its massive cash position, rather than deploying it. Buffett replied: "I don't think anybody sitting at this table has any idea of how to use it effectively, and therefore we don't use it … we only swing at pitches we like."
The 25% cut in Berkshire's Apple stock stake followed a near-50% reduction in the second quarter. Buffett's stake is down from 905 million Apple shares at the start of 2024.
Meanwhile, Warren Buffett sold about $9 billion in Bank of America shares in the quarter. That reduction was less surprising. Earlier filings had already shown that the Buffett-led conglomerate sold Bank of America stock significantly through Q3 and has continued to do so in the fourth quarter.
Overall, Berkshire was a net seller of stocks in the third quarter, to the tune of $34.6 billion, mostly Apple stock and BofA. The conglomerate also was a net seller in the first half of the year, mostly Apple.
Investors learned on Saturday that Berkshire was a net seller of $34.6 billion in publicly traded stocks in Q3. Berkshire bought $1.5 billion of stocks while selling $36.1 billion.
After the Q1 sales, Berkshire's investment portfolio is down to 48% publicly traded stocks from 63% in the first quarter, Stone calculated. Meanwhile, Berkshire's cash fortress rose from 28% to 49%.
A 13F regulatory filing, set for release on Nov. 14, will provide more details about Q3 portfolio changes.
Alongside Apple stock, shares of Bank of America, American Express and Coca-Cola are all among the biggest holdings in Berkshire Hathaway's stock portfolio.
