Berkshire Shares Rise on Surge in Operating Earnings, but Questions Linger About Cash
Class A shares of the Omaha-based conglomerate, which includes prominent companies such as Geico and BNSF Railway, experienced a 1.2% increase in premarket trading on Monday. This uptick followed Berkshire’s recent earnings report, released over the weekend. A substantial surge in operating profit significantly contributed to this movement, with earnings from Berkshire’s wholly owned businesses soaring by a remarkable 71% to reach $14.5 billion in the fourth quarter.
The dramatic rise in profits was largely fueled by a leap in insurance underwriting, where profits saw a substantial increase of 302% compared to the previous year, totaling $3.4 billion. However, the soaring operating earnings did not extend to Berkshire’s investment gains, which were noted to have sharply decelerated. Investment gains from the company’s portfolio holdings fell to $5.2 billion in the fourth quarter, a steep decline from $29.1 billion in the same period the previous year.
Berkshire maintained its trend of selling more equities than it purchased for the ninth consecutive quarter in the last months of the year. The total sale of equities surpassed $134 billion by 2024, with significant reductions in its two largest equity holdings – Apple and Bank of America. This selling activity contributed to an increase in Berkshire’s substantial cash reserves, reaching a new high of $334.2 billion, up from $325.2 billion at the end of the prior quarter.
Despite this accumulation of cash, Warren Buffett, often referred to as the “Oracle of Omaha,” indicated in his annual letter that this record-breaking cash position should not be interpreted as a shift away from his enthusiasm for buying stocks and businesses. Buffett articulated that the majority of Berkshire’s funds remain invested in equities and reassured stakeholders that this preference is unlikely to change.
Buffett suggested that the ongoing high market valuations might explain why there has been less activity in purchasing stocks, noting that “often, nothing looks compelling” in a bullish market. Furthermore, he expressed confidence in Greg Abek, his chosen successor, highlighting Abek’s potential to identify lucrative equity opportunities, a nod to Abek’s capabilities being on par with the late Charlie Munger.
Interestingly, Berkshire’s stock repurchase, or buyback, activities have remained on hold. The conglomerate did not undertake any share repurchases in the fourth quarter or the early part of this year through February 10. This decision has elicited mixed reactions from different quarters. Some investors and analysts have voiced impatience over this inaction, eagerly waiting for further clarification. However, others believe that Buffett’s conservative approach could lay the groundwork for seizing substantial opportunities in a potential economic downturn.
Bill Stone, chief investment officer at Glenview Trust Company and a Berkshire shareholder, remarked, “Shareholders should take comfort in knowing that the firm continues to be managed to survive and emerge stronger from any economic or market downturn by being in a financial position to take advantage of opportunities during a crisis.”
Berkshire’s overall performance last year was robust, with the company achieving a 25.5% rally in 2024, outpacing the S&P 500 and marking its best performance since 2021. The trend extends into the new year, with the stock already up by more than 5% in 2025.
As Berkshire navigates the dynamics of selling equities, expanding cash reserves, and pausing buybacks amid market conditions, investors remain watchful and optimistic for the strategic decisions that lie ahead under Buffett’s storied leadership. The cautious yet calculated approach Berkshire embodies continues to draw attention, especially in navigating through periods of market volatility.
