By Jonathan Stempel
OMAHA, Nebraska (Reuters) – Berkshire Hathaway slashed its huge stake in Apple in the first quarter as Warren Buffett’s conglomerate let its cash pile swell to a record $189 billion.
Buffett’s company also posted record operating profit topping $11 billion as its insurance operations benefited from better underwriting and higher investment income following rising interest rates. .
The value of Berkshire’s stake in Apple fell 22%, to $135.4 billion as of March 31, from $174.3 billion at the end of 2023, even as the iPhone maker’s stock price n t fell only 11% during the quarter.
Based on Apple’s stock price action, Berkshire appears to have sold about 115 million shares, or 13% of its holdings, during the quarter, ending with about 790 million.
A major sale is an about-face for Buffett, who is normally technology-phobic but has come to view Apple as a consumer goods company with strong pricing power and devoted customers.
Some investors, however, have expressed concern that Apple has consumed too much of Berkshire’s investment portfolio.
But the sales leave Buffett with more than six times the minimum $30 billion cash cushion he’s committed to keeping.
At Berkshire’s annual meeting on Saturday, Buffett assured shareholders that “unless something dramatic happens that actually changes capital allocation, Apple will be our biggest investment.”
He also said “I wouldn’t mind” increasing cash holdings, in light of stock market alternatives and conflicts around the world, and said liquidity could exceed $200 billion. dollars by the end of June.
Apple’s sales helped Berkshire realize $11.2 billion in after-tax gains during the quarter from the sale of investments. Buffett said he doesn’t mind paying taxes.
PROFITS INCREASE
First-quarter operating profit rose 39% to $11.22 billion, or about $7,807 per Class A share, from $8.07 billion a year earlier.
“Berkshire continues to benefit from attractive short-term investment yields and strong cash balances,” Edward Jones analyst James Shanahan said in a research note.
Net income fell 64% to $12.7 billion, or $8,838 per share, from $35.5 billion a year earlier, when Berkshire had large unrealized gains in its stock.
An accounting rule requires Berkshire to report these gains with its financial results. Buffett urges investors to ignore the resulting volatility.
Berkshire also repurchased $2.6 billion of its own shares in the first quarter, and a small amount during the first three weeks of April.
The results were released ahead of Berkshire’s annual shareholder meeting in Omaha, part of a weekend that draws tens of thousands of people to the city.
Buffett, 93, has led Berkshire since 1965, transforming it from a struggling textile company into a conglomerate whose dozens of businesses include Geico, the BNSF railroad, Berkshire Hathaway Energy and Dairy Queen and See’s Candies.
Diversification has led many investors, not just Buffett fans, to view Berkshire as a stable long-term investment, even amid recession fears and concerns about the banking industry.
GEICO HELPS DRIVE REVENUE
Insurance profits soared 80% to $5.2 billion. That included a more than doubling underwriting profit at Geico, which benefited from rate increases and a sharp drop in the percentage of premiums used to pay accidental claims.
Profit fell 8% for the BNSF railroad, partly due to lower fuel surcharges and an “unfavorable business mix.”
Berkshire Hathaway Energy saw its profits rise 72% as improved operating performance at utilities helped offset higher legal costs at real estate brokerage HomeServices of America related to legal settlements on brokerage commissions.
The energy sector still faces multibillion-dollar claims against its PacifiCorp unit following the 2020 Oregon wildfires.
(Reporting by Jonathan Stempel in Omaha, Nebraska; editing by Jason Neely and Diane Craft)
