Berkshire Hathaway's cash and Treasury-bill pile slipped from $380 billion to $365 billion in the second quarter as CEO Greg Abel turned the conglomerate into a net stock buyer for the first time in 14 quarters. Berkshire also posted its biggest buyback quarter since 2021 and a 16% jump in operating income to $13 billion.
Greg Abel's Berkshire Hathaway became a net buyer of stocks in the second quarter for the first time in 14 quarters, purchasing $23.5 billion in stocks while selling just $3.7 billion — a net outlay of nearly $20 billion. The last time Berkshire bought more on a net basis was the first quarter of 2022.
That buying pulled Berkshire's cash and Treasury-bill pile down to $365 billion at the end of June, from $380 billion at the end of March, excluding Treasury payables. Abel, who succeeded Warren Buffett as CEO at the turn of this year, also oversaw the company's biggest quarter for stock buybacks since 2021, repurchasing $4.6 billion of Berkshire stock.
Earnings climb on railway and energy gains
The parent company of Geico, Dairy Queen and Jazwares reported a 16% year-on-year rise in operating income to $13 billion in the second quarter. Lower insurance profits were offset by profit growth at BNSF Railway, Berkshire Hathaway Energy and the manufacturing, service and retailing division, plus a nearly $1.3 billion foreign-currency exchange gain. Berkshire also completed its $8.5 billion cash acquisition of Taylor Morrison Home Corporation on July 24, after the quarter had ended.
A change in tempo after two cautious years
Berkshire's cash pile roughly doubled during Buffett's last two years as CEO as he struggled to find bargains in a red-hot market for stocks and private businesses. Macrae Sykes, a portfolio manager at Gabelli Funds, said in emailed comments that he welcomed the sizable buyback since it suggested Abel and Buffett, who remains chairman, once again saw Berkshire shares as good value and were finding ways to deploy cash.
Abel pushes back on the retreat narrative
Abel pledged allegiance to Buffett's disciplined capital allocation in his first letter to shareholders in February, writing that Berkshire pursues opportunities where the reward matches the risk. He said he's proud of a culture that lets Berkshire make considered investments quickly.
He rejected the idea that Berkshire's cash position signals a retreat from investing, writing: "our substantial cash position signals a retreat from investing. It does not." Abel added that Berkshire will stay patient and disciplined while it keeps evaluating opportunities for shareholders.
Source: Business Insider
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