Buffett seeks to reassure shareholders over document money pile

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Warren Buffett has sought to reassure Berkshire Hathaway shareholders that he nonetheless desires to personal companies, regardless of the group’s money pile rising to a document after it dumped shares and didn’t make any huge acquisitions.

In his annual letter to shareholders, launched on Saturday, the billionaire investor stated he would “by no means favor possession of cash-equivalent property over the possession of excellent companies”, a class that additionally consists of the stakes Berkshire owns in US blue-chip firms.

The 94-year-old’s determination to deal with the money pile, which hit $334.2bn on the finish of final yr, comes as document valuations have dented the enchantment of US shares and likewise made it tougher for Buffett to unearth the main offers which have lengthy been his trademark.

In his letter, Buffett stated: “Berkshire shareholders can relaxation assured that we’ll perpetually deploy a considerable majority of their cash in equities — principally American equities though many of those can have worldwide operations of significance.”

The letter was launched alongside Berkshire’s fourth-quarter outcomes, which confirmed its money pile grew by $9bn within the quarter, as Buffett trimmed stakes in shares, together with multibillion-dollar gross sales of shares in Citigroup and Financial institution of America.

Column chart of Cash, cash equivalents and Treasury bills ($bn) showing Berkshire Hathaway’s cash pile rises to a new record

The group’s money pile has nearly doubled over the previous yr because it ploughed the proceeds of inventory gross sales — together with tens of billions of {dollars}’ price of shares in Apple — into Treasury payments.

Berkshire, a sprawling conglomerate with companies starting from US insurer Geico to railroad BNSF, disposed of $143bn of shares in 2024, far surpassing the $9bn it invested in equities.

Berkshire’s growing shift into US authorities debt has been a boon for the corporate because the Federal Reserve started lifting rates of interest in 2022.

Final yr, the corporate’s insurance coverage subsidiary reported $11.6bn of curiosity revenue, primarily from its holdings of Treasury payments, comfortably exceeding the dividends it receives from its portfolio of shares.

“We have been aided by a predictable massive acquire in funding revenue as Treasury Invoice yields improved and we considerably elevated our holdings of those extremely liquid short-term securities,” Buffett instructed shareholders.

The conglomerate reported working earnings of $47.4bn for 2024, up 27 per cent from 2023, led by a stronger efficiency by its insurance coverage enterprise.

Column chart of Net quarterly purchases and sales of equity securities ($bn) showing Buffett continues to trim Berkshire’s stock holdings

The working outcomes exclude modifications within the worth of Berkshire’s $272bn inventory portfolio, swings which Buffett has lengthy dismissed as largely meaningless. Berkshire disclosed that it made $101bn of positive factors on inventory gross sales final yr.

Addressing the group’s money pile, Buffett pointed to the rise in worth of Berkshire’s practically 200 working subsidiaries, which embrace the ice cream chain Dairy Queen and underwear maker Fruit of the Loom, as one indication that the “nice majority” of Berkshire’s investments remained in a mixture of companies and equities.

The billionaire additionally warned shareholders of the hazard to the worth of a rustic’s debt and foreign money ought to “fiscal folly” prevail.

The warning comes as bond buyers weigh up Donald Trump’s pledge to slash federal spending towards the inflationary risk from the tariffs the US president has promised to impose on America’s buying and selling companions.

“Paper cash can see its worth evaporate if fiscal folly prevails,” he wrote. “In some international locations, this reckless follow has turn into ordinary, and, in our nation’s quick historical past, the US has come near the sting. Fastened-coupon bonds present no safety towards runaway foreign money.”

Whereas Berkshire has offered extra shares than it has purchased for 9 consecutive quarters, Buffett stated he anticipated the group to spice up its stakes in 5 Japanese buying and selling teams that it first backed in 2019.

He added that the 5 companies — Mitsubishi Corp, Mitsui & Co, Itochu Corp, Sumitomo Corp and Marubeni Corp — had agreed to let Berkshire’s stakes exceed a ten per cent threshold beforehand agreed.

“Over time, you’ll possible see Berkshire’s possession of all 5 enhance considerably,” Buffett stated, including that the long run leaders of Berkshire “shall be holding this Japanese place for a lot of many years”.

Buffett stated the stakes, which Berkshire paid $13.8bn for, at the moment are price $23.5bn.

Berkshire additionally confirmed that the corporate has not purchased again its personal shares since Could, a sign Buffett doesn’t see the inventory as low-cost. The corporate’s class A inventory has returned 109 per cent over the previous 5 years.

“Usually, nothing appears to be like compelling; very sometimes we discover ourselves knee-deep in alternatives,” he stated.