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It appears to be a case of “Apple and chill” for Warren Buffett. Berkshire Hathaway, the US business led by the world’s most famous investor, recently reported that its cash stash had swelled to a whopping $157bn. With risk-free rates hovering about 5 per cent, staying on the sidelines is lucrative enough.
Late on Tuesday, Berkshire reported its stock holdings as of the end of the third quarter. The conglomerate had sold down relatively modest stakes in the likes of General Motors, HP, Chevron and Procter & Gamble. Overall, quarterly earnings statements show that Berkshire had shed about $40bn of stock in the past year.
A 6 per cent stake in the iPhone maker remains. Apple shares are up 50 per cent in 2023 and the Buffett position is now worth more than $150bn. The question now is this: will there be enough dislocation in the economy to create an elephantine acquisition possibility?
Among Berkshire’s operating segments, the backbone insurance business has had a strong 2023. High interest rates have boosted investing income in 2023. And Berkshire made a big bet in underwriting property and casualty policies in Florida, betting on a tame hurricane season. That wager has largely paid off.
Results in the other big Berkshire investment platforms such as railroads, power utilities and homebuilding, have been mixed. The shares are up 15 per cent this year, just slightly below the S&P 500. This performance has largely been driven by Apple and six other big tech stocks.
Buffett is known for making large profitable trades by lending to distressed banks or by making big acquisitions. These “special situation” rescue transactions may arise as interest rates remain elevated. But with the economy and markets in the US largely stable for now, these easy wins are not so easy to come by either.
Buffett griped during the era of zero-interest rates that there were few ambitious things to do. That may still be true. But at least he is now being paid to wait.
