Berkshire Hathaway’s stock surged 4.5% last week, erasing nearly two-thirds of its lag behind the S&P 500, driven by strong Q3 earnings and a shift away from overvalued AI stocks toward profitable companies.
Berkshire Hathaway Q3 operating income rose 34% to $13.5 billion, boosted by insurance underwriting profits.
The company’s cash pile hit a record $381.7 billion, reflecting no stock buybacks and net stock sales.
Holdings in Apple and Bank of America were trimmed, with Apple’s stake cut by 69% over two years, generating significant proceeds.
Discover how Berkshire Hathaway’s rally signals a market shift from AI hype to value stocks, with Q3 earnings highlighting robust profits. Explore Warren Buffett’s strategy—read on for key insights and portfolio updates.
What Caused Berkshire Hathaway’s Recent Stock Rally?
Berkshire Hathaway‘s stock rallied 4.5% last week, significantly narrowing its underperformance against the S&P 500 from 12.2 percentage points to 4.3 points as of October 29, according to Barron’s. This surge followed a robust third-quarter earnings report released over the weekend, contrasting with the Nasdaq’s 3% decline—its steepest weekly drop since April. Investors increasingly favored value-oriented firms like Berkshire amid concerns over expensive AI investments and potential U.S. economic slowdowns.
How Did Berkshire Hathaway’s Q3 Earnings Perform?
Berkshire Hathaway reported a 34% increase in operating income for the third quarter, reaching nearly $13.5 billion, primarily propelled by a 200% surge in profits from insurance underwriting. This performance underscores the company’s diversified operations, including its insurance subsidiaries, which benefited from favorable market conditions and reduced catastrophe losses. According to financial analyses, such as those from Barron’s, this earnings beat alleviated investor concerns and highlighted Berkshire’s resilience in a volatile market. Short, targeted underwriting strategies allowed the firm to capitalize on premium growth without excessive risk exposure. Expert observers note that this quarter’s results reinforce Berkshire’s appeal as a stable investment amid tech sector turbulence, with operating earnings excluding investment gains providing a clear picture of underlying business strength. Data from the earnings release indicates that non-insurance segments, like utilities and railroads, also contributed steadily, though insurance was the standout driver. Overall, these figures position Berkshire Hathaway favorably for continued outperformance in uncertain economic times.
Frequently Asked Questions
Why Didn’t Warren Buffett Authorize Stock Buybacks After Strong Q3 Earnings?
Warren Buffett opted against stock buybacks despite the solid Q3 results, indicating he views Berkshire Hathaway shares as not sufficiently undervalued, even after trading below May highs. This decision aligns with his long-term value discipline, preserving the company’s ample cash reserves for potential future opportunities or strategic investments. Financial reports confirm no repurchases occurred, emphasizing Buffett’s cautious approach to capital allocation.
What Is the Size of Berkshire Hathaway’s Cash Holdings Following Q3?
Berkshire Hathaway’s cash balance climbed to a record $381.7 billion by the end of September, up 10.9% from June, as the company sold more stocks than it purchased and refrained from buybacks. Adjusting for BNSF Railway’s cash and Treasury bill timing, the effective pile stands at $354.3 billion, a 4.3% increase. This substantial liquidity provides flexibility amid market shifts, according to company filings.
Key Takeaways
- Berkshire Hathaway’s rally reflects a market pivot: Investors are rotating from high-valuation AI stocks to profitable, cash-rich firms like Berkshire, amid Nasdaq declines.
- Record cash reserves signal prudence: With $381.7 billion in cash and no buybacks, Warren Buffett maintains liquidity for opportunistic moves, reducing reliance on volatile equities.
- Portfolio trimming continues strategically: Sales in Apple and Bank of America generated billions, streamlining holdings while retaining significant stakes in key assets.
Conclusion
Berkshire Hathaway’s recent stock rally and impressive Q3 earnings demonstrate the enduring strength of Warren Buffett’s value investing philosophy, even as AI stocks face profit-taking. By amassing record cash and judiciously trimming positions in holdings like Apple and Bank of America, the company is well-positioned for future resilience. As markets navigate economic uncertainties, Berkshire’s focus on fundamentals offers a compelling case for long-term investors—stay informed on portfolio updates to capitalize on these trends.
Buffett Holds the Buyback, Piles Up Record Cash
Despite the strong quarter, Warren Buffett did not authorize any stock buybacks, suggesting he still considers Berkshire Hathaway shares undervalued insufficiently for repurchase at current levels, even after extended periods below May peaks. With no capital deployed on repurchases and Berkshire selling more equities than acquiring, the cash hoard swelled to $381.7 billion by September’s end. This marks a 10.9% rise from June, and after deducting BNSF Railway’s holdings and accounting for Treasury bill purchase timing, the adjusted figure remains robust at $354.3 billion, up 4.3% sequentially.
Speculation surrounds Buffett’s potential transition, with a scheduled press statement on November 10 addressing philanthropy, Berkshire matters, and shareholder interests, as confirmed in a recent news release and reported by The Wall Street Journal. While not framed as a retirement announcement, it hints at succession planning. Should Buffett step back now, he would depart with Berkshire boasting unprecedented liquidity, renewed momentum, and diminished exposure to speculative stocks.
Apple, BofA Both Trimmed as Portfolio Reshuffle Continues
A detailed Q3 portfolio disclosure is slated for the following Friday, but early indicators from the 10-Q filing reveal ongoing sales of major positions by Buffett and his team. The filing notes a $1.2 billion reduction in the cost basis of consumer stocks, encompassing Apple, which experienced a 24% quarterly gain, positioning it as a logical profit-taking target.
Apple remains Berkshire’s top equity holding, valued at $75.2 billion, yet the stake has been reduced by 69% over the past two years. Barron’s analysis attributes the $1.2 billion drop to Apple’s per-share cost basis of $35, equating to roughly 35 million shares sold, yielding approximately $8 billion at an average Q3 price of $230 per share.
Beyond Apple, the broader $12.4 billion in Q3 equity disposals suggests $4.4 billion linked to Bank of America, another holding under reduction. Since early 2024, Berkshire has divested 40% of its Bank of America position, though it endures as the third-largest public equity at $32.2 billion.
Berkshire maintains sizable disclosed stakes across the U.S., Japan, and Hong Kong. Notably, Japanese firms Itochu and Mitsubishi stand out, with valuations derived from March 17 and August 28 data, respectively, converted from yen to dollars.
In contrast, State Street persists with AI investments despite tech sector realizations. Anna Paglia, Chief Business Officer, stated on CNBC’s “ETF Edge” that AI growth momentum endures. “How would you not want to participate in the growth of AI technology?” she remarked. “Everybody has been waiting for the cycle to change from growth to value. I don’t think it’s happening just yet because of the momentum.” Paglia further explained that rebalancing toward value awaits clear market signals of slowing megatrends.