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Warren Buffett has aimed to assure Berkshire Hathaway’s shareholders of his continued interest in acquiring businesses, even as the company’s cash holdings have reached unprecedented levels. This increase followed divestments in stocks and a lack of major acquisitions. In his annual letter to shareholders, distributed on Saturday, Buffett expressed that he would “never prefer ownership of cash-equivalent assets over the ownership of good businesses,” which includes shares Berkshire holds in prominent U.S. companies.
The 94-year-old investor’s remarks on the cash reserves, which amounted to $334.2 billion by the end of last year, are set against a backdrop of high stock valuations in the U.S. that have reduced their attractiveness and complicated Buffett’s efforts to pursue the substantial deals characteristic of his investment approach. Buffett stated, “Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities — mostly American equities although many of these will have international operations of significance.”
The letter coincided with the release of Berkshire’s fourth-quarter results, showing a $9 billion increase in its cash reserves as Buffett reduced stakes in various stocks, including significant sales in Citigroup and Bank of America shares. Over the past year, Berkshire’s cash reserves have nearly doubled as proceeds from stock sales, such as Apple’s, have been invested in Treasury bills.
Berkshire, a diverse conglomerate with entities like U.S. insurer Geico and railroad BNSF, sold $143 billion worth of stocks in 2024, far exceeding the $9 billion it invested in equities. This strategic pivot toward U.S. government debt has proven beneficial for the company, given the Federal Reserve’s interest rate hikes since 2022. In 2024, the company’s insurance division reported $11.6 billion in interest income, primarily from Treasury bill holdings, surpassing the dividends from its stock portfolio.
Buffett highlighted to shareholders that an expected rise in investment income was bolstered by improved Treasury bill yields and a substantial increase in these highly liquid short-term securities. Berkshire posted operating earnings of $47.4 billion for 2024, a 27% increase from 2023, driven by a more robust performance from its insurance sector.
The operating earnings do not account for fluctuations in the value of Berkshire’s $272 billion stock portfolio, changes that Buffett often regards as insignificant. Berkshire also revealed $101 billion in gains from stock sales last year. In discussing the company’s cash hold, Buffett highlighted the appreciation in value of nearly 200 operating subsidiaries, such as Dairy Queen and Fruit of the Loom, indicating that the vast majority of Berkshire’s investments are in a blend of businesses and equities.
Buffett also cautioned shareholders about the risks associated with a nation’s debt and currency if “fiscal folly” takes hold. This warning arises as bond investors assess former President Donald Trump’s proposed federal spending cuts against potential inflation from the tariffs he intended to enforce on trade partners. “Paper money can see its value evaporate if fiscal folly prevails,” Buffett noted, adding that some countries habitually engage in reckless fiscal practices, and even the U.S. has neared perilous decisions in its relatively short history.
In a period spanning nine successive quarters, Berkshire sold more stocks than it purchased. However, Buffett anticipates increasing stakes in five Japanese trading companies originally acquired in 2019. Buffett indicated that Mitsubishi Corp, Mitsui & Co, Itochu Corp, Sumitomo Corp, and Marubeni Corp have consented to allow Berkshire’s stakes to surpass an earlier-agreed 10 percent limit. Buffett projected that “over time, you will likely see Berkshire’s ownership of all five increase somewhat,” predicting that future leaders of Berkshire would maintain this Japanese investment for many decades.
Berkshire previously acquired these stakes for $13.8 billion, which are now valued at $23.5 billion. Additionally, Berkshire verified that it has not repurchased its own shares since May, suggesting that Buffett does not consider the stock undervalued. Over the past five years, the company’s class A stock has yielded a return of 109 percent. Buffett observed, “Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities.”
