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Warren Buffett has sought to reassure Berkshire Hathaway shareholders that he would all the time choose proudly owning companies, after his transfer to dump shares and the shortage of a giant acquisition helped drive the group’s money pile to a document excessive final yr.
In his annual letter to shareholders, launched on Saturday, the billionaire investor mentioned he would “by no means choose possession of cash-equivalent belongings over the possession of fine companies”, a class that additionally contains the stakes Berkshire owns in US blue-chip firms.
The 94-year-old’s determination to handle the money pile, which hit $334.2bn on the finish of final yr, comes as document valuations have dented the attraction of US shares and in addition made it more durable for Buffett to unearth the most important offers which have lengthy been his trademark.
In his letter, Buffett mentioned: “Berkshire shareholders can relaxation assured that we are going to eternally deploy a considerable majority of their cash in equities — largely 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.
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 rising shift into US authorities debt has been a boon for the corporate for the reason that 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 had been aided by a predictable giant acquire in funding revenue as Treasury Invoice yields improved and we considerably elevated our holdings of those extremely liquid short-term securities,” Buffett informed 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.
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 features 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 forex ought to “fiscal folly” prevail.
The warning comes as bond traders weigh up Donald Trump’s pledge to slash federal spending in opposition to 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 nations, this reckless apply has turn into recurring, and, in our nation’s quick historical past, the US has come near the sting. Mounted-coupon bonds present no safety in opposition to runaway forex.”
Whereas Berkshire has offered extra shares than it has purchased for 9 consecutive quarters, Buffett mentioned 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 seemingly see Berkshire’s possession of all 5 improve considerably,” Buffett mentioned, including that the longer term leaders of Berkshire “might be holding this Japanese place for a lot of a long time”.
Buffett mentioned 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 compelling; very occasionally we discover ourselves knee-deep in alternatives,” he mentioned.
