Image Source: Pexels

Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) the conglomerate run by Warren Buffett, has seen its stock price fall nearly 3% since it posted third quarter earnings on Saturday that fell short of earnings estimates.

The conglomerate run by Warren Buffett posted revenue of $93 billion in the quarter, which was essentially flat year-over-year.

However, the company’s operating earnings, from the portfolio of businesses it owns, fell about 6.5% to $10.1 billion. Operating earnings per share on its “B” shares were $4.68 per share, which came in below $4.89 EPS estimates.

Earnings were most impacted by higher losses in its insurance business, including $565 million in losses from Hurricane Helene and increases in liabilities for prior accident years’ claims.

The disappointing operating results likely led to the selloff this week, but there were also major changes to Berkshire’s multi-billion-dollar investment portfolio that may have influenced investors.

Selling more Apple stock

Berkshire Hathaway is known for its massive portfolio of stocks, which reported $18.6 billion in unrealized investment gains in the quarter and $1.9 billion in realized gains from stocks sold during the quarter.

But this year, in particular, Buffett has been paring the portfolio, selling off shares of stocks that the company has held for years. That continued in the third quarter, as Berkshire Hathaway sold more of its largest position – Apple (Nasdaq: AAPL).

Apple has been far and away Berkshire’s largest holding for years, and it still is, although the company’s stake is much smaller than it was. In the third quarter earnings report, the company said it owned a $69.9 billion stake in Appel, which is down from $84 billion at the end of Q2.

But just nine months prior, on December 31, 2023, Berkshire owned $174.3 billion in Apple stock, so it has cut about 60% of its position since then.

At the end of 2023, Apple accounted for 49% of the $353 billion Berkshire Hathaway portfolio; now it makes up about 26% of the $271 million portfolio.

More AMEX, less Bank of America

Another notable shift in the portfolio is the rise of American Express (NYSE: AXP) and the decline of Bank of America (NYSE: BAC). Bank of America has long been the second largest stock in the portfolio, but now it is third behind American Express.

Berkshire has a $44.1 billion stake in American Express, or roughly 16% of the total portfolio, while the stake in Bank of America is $31.7 billion, or 11.7%.

At the beginning of 2024, Berkshire owned $28.4 billion of American Express stock and $34.8 billion of Bank of America shares.

Buffett did not elaborate on these portfolio shifts in the earnings report, but it suggests a bearish view of the market, likely based on the idea that it is overpriced.

It also means he is hording cash, with a record $325 billion in cash on the sidelines, up from $277 billion at the end of Q2.

This pile of cash suggests that Buffett and his team are not finding any good values worth splurging on right now and they are content to generate solid yields that Treasury bills and cash investment are generating right now.

More details on the shares that Berkshire bought and sold in Q3 will be available when the company files its 13F form with the SEC in the weeks ahead.

Is Berkshire Hathaway stock a buy?

Berkshire Hathaway’s performance in the third quarter was mostly related to underwriting losses due to Hurricane Helene and it will likely take another hit from losses due to Hurricane Milton in Q4.

With the diverse group of businesses it owns, Berkshire Hathaway is built to weather storms like this and continue to churn out solid gains.

In addition, the company is also stock piling cash, which it can deploy toward new investments that can drive future profits. Apple stock still remains Berkshire’s largest holding, but the portfolio had gotten top heavy so its probably wise to diverse it a bit more.

Berkshire Hathaway stock is cheap, trading at about 9 times earnings, and it has a median price target of $495 per share, which is about 12% higher than its current price.

Due to its management, its track record, and its focus on value, Berkshire Hathaway is pretty much always a buy, particularly on a dip like this and particularly in an uncertain market.

More By This Author: