Warren Buffett, the 94-year-old CEO of Berkshire Hathaway, has recently undertaken a series of strategic financial maneuvers that have captured the attention of investors and analysts alike. In the latest quarter, Berkshire Hathaway's cash reserves reached a record high of $334 billion, while the company continued its trend of selling more stocks, including substantial sales of Apple and Bank of America shares. Despite this apparent cautiousness, Buffett did not explain the reasons behind these moves in his annual letter, sparking widespread speculation.
Buffett dismissed the notion that these conservative financial decisions were a departure from his historical enthusiasm for stocks. He emphasized that Berkshire Hathaway would continue to favor equities over cash, a sentiment echoed in his annual letter. Some analysts have speculated that these actions might be part of Buffett's strategy to prepare the company for his designated successor, Greg Abel, by reducing outsized positions and increasing liquidity.
Buffett has publicly endorsed Greg Abel, comparing his ability to identify equity opportunities to that of the late Charlie Munger. Abel's prowess in navigating the market has been recognized as a significant asset for Berkshire's future. Buffett wrote in his letter, "Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities. Greg has vividly shown his ability to act at such times as did Charlie."
During 2024, Berkshire Hathaway sold more than $134 billion worth of stocks, largely attributed to the sales of Apple and Bank of America shares. Despite these substantial sales and an impressive increase in operating earnings, Buffett expressed a lack of interest in buying back Berkshire's own stock. Notably, the conglomerate did not repurchase any shares in the fourth quarter or the first quarter up to February 10.
The decision to net sell equities for the ninth consecutive quarter in the final period of last year has fueled curiosity among shareholders and market observers. Questions have been raised about Berkshire's massive cash reserves, especially in light of anticipated declines in interest rates from their multi-year highs. Buffett sought to reassure stakeholders, stating, "Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities."
Berkshire Hathaway's stock performance has been robust over the past few years, with shares increasing by 25% and 16% respectively in the previous two years, and a 5% rise so far this year. However, Buffett maintained that this should not distract from Berkshire's long-term commitment to equities. He stated unequivocally that "Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance."