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Berkshire Hathaway’s cash reserves reached an unprecedented $334.2 billion by the end of last year, as Warren Buffett reduced stock holdings and accumulated substantial interest earnings from the company’s significant investments in Treasury bills.
Based in Omaha, Berkshire revealed on Saturday that it increased its cash reserves by $9 billion in the last quarter of the previous year, following Buffett’s decision to reduce investments in prominent U.S. corporations, including selling shares worth billions in Citigroup and Bank of America. The company’s cash holdings have nearly doubled over the prior year.
The expansive conglomerate posted operating earnings of $47.4 billion for 2024, representing a 27 percent increase from the previous year, largely due to improved performance in the insurance sector.
These operating results do not include fluctuations in the value of Berkshire’s $272 billion stock portfolio, which Buffett has consistently regarded as largely insignificant.
In 2024, Berkshire sold $143 billion worth of stocks, significantly exceeding the $9 billion it reinvested in equities, directing much of the revenue towards short-term Treasury bills.
Buffett’s ability to finalize deals has been hindered recently due to the high valuations of U.S. stocks, making it challenging to find the large acquisitions that have been central to his strategy for years.
The conglomerate’s fourth-quarter financial outcomes were published together with Buffett’s widely-read annual letter to shareholders. In the correspondence, Buffett stated, “In 2024, Berkshire exceeded my expectations even though 53 percent of our 189 operating businesses experienced a drop in earnings. We benefited from a predictable significant gain in investment income as Treasury Bill yields increased, and we considerably boosted our holdings of these highly-liquid short-term securities.”
Berkshire’s increased focus on U.S. government debt has proven advantageous since the Federal Reserve began raising interest rates in 2022. The company’s insurance division reported interest income of $11.6 billion from Treasury bill holdings last year, comfortably surpassing the dividends earned from its stock portfolio.
The 94-year-old investor assured shareholders that the expanding cash reserves were not a concern, highlighting the increased value of Berkshire’s nearly 200 operating subsidiaries, which include BNSF railroad, Dairy Queen, and Fruit of the Loom.
Buffett reassured Berkshire shareholders by stating, “We will always allocate a significant majority of their money into equities. Berkshire will never prioritize cash-equivalent assets over acquiring good businesses.”
Additionally, the investor cautioned about the potential risks to a country’s debt and currency value should “fiscal folly” become prevalent. He noted, “Paper money can lose its value if fiscal irresponsibility takes hold. In some nations, this reckless behavior has become habitual, and in our country’s brief history, the U.S. has teetered on the brink. Fixed-coupon bonds do not offer protection against escalating currency devaluation.”