Warren Buffett has marked three consecutive years as a net seller of stocks, as revealed in Berkshire Hathaway’s third-quarter earnings report released on Saturday. The iconic investor has been divesting more shares than he is acquiring, a trend that coincides with his planned departure from the CEO role by the end of this year.
During the latest quarter, Berkshire sold a total of $12.5 billion in stock while purchasing $6.4 billion, resulting in the twelfth consecutive quarter of net selling. Specific details regarding the stocks involved will be disclosed in a regulatory filing later this month. In the meantime, the company’s cash reserves have surged to a record high of $382 billion, driven by a 34% increase in operating earnings. Notably, Buffett has refrained from stock buybacks for five consecutive quarters.
As Berkshire’s stock portfolio diminishes, there has been a notable shift of capital into Treasury debt. However, the recent decline in short-term interest rates has led to a 13% drop in net investment income, which now stands at $3.2 billion for the third quarter. The cautious approach to stock investment emerged in 2022, following the Federal Reserve’s aggressive rate hikes aimed at controlling inflation. This tightening of monetary policy affected stock valuations, yet it has not prompted Buffett to engage in bargain hunting.
Berkshire Hathaway’s stock performance has been lackluster in comparison to the broader market. Since May, when Buffett announced his impending transition to Greg Abel as CEO, the company’s shares have declined by 12%. Despite the market’s recovery and new highs, particularly in AI-related sectors, Buffett’s strategy appears to be one of restraint.
Buffett’s Legacy and Strategic Moves
Buffett is expected to continue serving as chairman, but he has adopted a cautious stance to pave the way for Abel, who has been increasing his leadership responsibilities in recent months. In a significant move last month, Berkshire Hathaway agreed to acquire the chemicals division of Occidental Petroleum for nearly $10 billion. This acquisition, the largest since the purchase of insurer Alleghany in 2022, is expected to enhance Berkshire’s nearly 30% ownership stake in Occidental.
The announcement made on October 2 was notable for being the first to directly quote Abel without mentioning Buffett’s name. Doug Leggate, an energy analyst at Wolfe Research, praised the acquisition as a “win-plus” for Berkshire, highlighting its benefits not only for Berkshire but also for Occidental, in which it holds a significant stake.
Buffett’s strategic decisions during this transitional period reflect his longstanding investment philosophy, balancing caution with opportunities that align with Berkshire’s broader portfolio goals. As the company prepares for new leadership, it remains to be seen how these strategies will evolve moving forward, particularly under Greg Abel’s guidance.
