Berkshire’s operating earnings jump 34%, Buffett buys back no stock and raises cash hoard to $381 billion
News Summary
Berkshire Hathaway reported a significant 34% year-over-year jump in third-quarter operating profit to $13.485 billion, primarily driven by a more than 200% surge in insurance underwriting income to $2.37 billion. Despite a substantial pullback in the stock, Warren Buffett refrained from repurchasing shares during the first nine months of 2025. Berkshire's Class A and B shares are up 5% each year-to-date, lagging the S&P 500's 16.3% gain. Without buybacks, Berkshire's cash hoard swelled to a record $381.6 billion, surpassing the previous high of $347.7 billion set earlier this year. The company also net sold equities in the third quarter, realizing a taxable gain of $10.4 billion. The 95-year-old Buffett announced in May that he is stepping down as CEO at year-end, with Greg Abel set to take over while Buffett remains chairman. Berkshire's shares tumbled double digits from all-time highs following this announcement. Last month, Berkshire announced a $9.7 billion cash deal to acquire Occidental Petroleum's petrochemical unit, OxyChem, marking its largest acquisition since 2022. Overall earnings, including investment gains, rose 17% year-on-year to $30.8 billion.
Background
Berkshire Hathaway is a diversified holding company led by legendary investor Warren Buffett, renowned for its conservative investment approach and preference for value stocks. Under Buffett's six-decade tenure, Berkshire has grown into one of the world's largest public companies, with its investment decisions and cash pile management closely watched by the market. The news comes as Buffett has announced his plan to step down as CEO at the end of 2025, with Greg Abel slated to succeed him. This leadership transition has fueled market speculation about the company's future capital allocation strategy and concerns about the dissipation of the "Buffett premium," contributing to the stock's recent underperformance. Despite this, Berkshire has made significant acquisitions recently, including the $11.6 billion purchase of insurer Alleghany in 2022 and the more recent $9.7 billion acquisition of OxyChem.
In-Depth AI Insights
Why is Buffett remaining on the sidelines, allowing the cash hoard to swell despite stock pullback? What market signal does this convey? Berkshire's decision not to repurchase shares even with its stock lagging the S&P 500 and experiencing a pullback, while accumulating a record $381.6 billion in cash, typically signals Buffett's cautious stance on overall market valuations. - Despite strong insurance underwriting profits, Buffett likely perceives that the broader market (including Berkshire's own shares) does not offer sufficient "value" or "margin of safety" for substantial capital deployment. - The massive cash pile could also be a strategic waiting game for major acquisition opportunities in the future, rather than solely a reflection of a lack of confidence in the current market. - Given potential uncertainties in economic policy and market volatility under President Trump's administration in 2025, Buffett's conservatism might also be partially driven by a desire to wait for a clearer investment landscape. How will Berkshire's capital allocation strategy evolve under Greg Abel's leadership, and will the diminishing "Buffett premium" accelerate new approaches? With Buffett stepping down as CEO, Abel will face immense pressure to effectively deploy the colossal cash reserves, potentially foreshadowing a more proactive capital allocation strategy for Berkshire. - Abel is likely to continue Buffett's preference for large, high-quality business acquisitions, as evidenced by the OxyChem deal, but his approach to share buybacks and public equity investments might be more flexible. - The fading "Buffett premium" means the market will scrutinize Berkshire's performance more rigorously, which could prompt Abel to take more aggressive measures to enhance shareholder returns, potentially including increased share buybacks, especially if the stock is deemed undervalued. - His challenge will be to balance maintaining Buffett's value investing philosophy with adapting to current market conditions and potentially exploring new growth areas. What do Berkshire's portfolio adjustments (net selling equities) and cash accumulation imply for current market sentiment and future trends? Berkshire's net selling of equities and accumulation of cash suggest a potential concern over high equity valuations in the current market, indicating a search for market corrections or unique opportunities. - This behavior could be interpreted as a defensive posture, reflecting an anticipation of future economic or market uncertainties, especially after a period of strong market gains. - Given Berkshire's size and influence, its cautious capital allocation strategy could guide broader investor sentiment, prompting other large institutions to re-evaluate their risk exposures and cash positions. - Investors may well watch Berkshire's cash movements as a potential bellwether for market turning points or the emergence of significant investment opportunities.