Berkshire, Post-Buffett, Sees Q2 Net Profit Double... Shifts From Hoarding Cash to Investing

Berkshire Hathaway, which welcomed a new CEO this January following the departure of 95-year-old legendary investor Warren Buffett, has shifted away from its strategy of hoarding massive piles of cash and begun actively deploying funds.

Berkshire announced on the 8th (local time) that its net profit for the second quarter surged 107.5% year-over-year to $25.67 billion.

The profit growth was driven largely by a substantial increase in valuation gains from investment assets such as stocks.

Berkshire's investment gain for the second quarter was tallied at $12.68 billion.

Operating profit, which indicates the company's business performance excluding volatility from investment gains and losses, rose 16.3% from the previous year to $12.98 billion.

Profits from the manufacturing, service, and retail sectors grew 24% year-over-year to $4.47 billion, leading the performance improvement.

Profits in the energy sector also increased by 27%, but profits in the insurance sector decreased by 13% due to sluggishness at auto insurer GEICO.

Along with the earnings, what has drawn attention is the shift in capital allocation strategy.

Berkshire's cash and short-term Treasury bill holdings stood at $364.7 billion as of the end of June, down about 4% from $380.2 billion at the end of the previous quarter.

This marks the first time in about four years that Berkshire's cash reserves have decreased.

Previously, Berkshire had been accumulating massive amounts of cash while maintaining a net-selling stance on equities due to a lack of suitable investment targets.

In the second quarter, the company purchased approximately $23.5 billion worth of stocks and sold $3.7 billion.

This brought an end to a streak of net stock sales that had continued for 14 consecutive quarters.

Among these moves, it was revealed that Berkshire purchased about $10 billion worth of shares in Google parent company Alphabet in June.

Berkshire also repurchased approximately $4.53 billion of its own shares in the second quarter.

By comparison, the buyback amount in the first quarter was $235 million.

In light of this, the market interprets that under CEO Abel, Berkshire has begun shifting its capital allocation strategy through share buybacks and new equity investments.

However, it remains uncertain whether Berkshire will aggressively expand large-scale mergers and acquisitions (M&As).

Citing Berkshire insiders, The Wall Street Journal (WSJ) reported that CEO Abel judges asset prices in both public and private markets to be generally high, and is expected to approach large acquisitions with patience.

Berkshire's cash reserves still exceed $360 billion.

The market is closely watching how much the capital allocation strategy of Berkshire under CEO Abel will change.

(Photo: AP, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.