Jonathan Stempel
OMAHA, Neb. (Reuters) – Berkshire Hathaway (NYSE:) significantly trimmed its huge stake in Apple in the first quarter as Warren Buffett’s conglomerate allowed its cash reserves to balloon to a record $189 billion.
Buffett’s company also reported record operating profit of more than $11 billion as its insurance operations benefited from improved underwriting and higher investment returns as interest rates rose.
The value of Berkshire’s stake in Apple fell 22% to $135.4 billion as of March 31 from $174.3 billion at the end of 2023, although the iPhone maker’s share price fell just 11% in the quarter.
Based on changes in Apple’s share price, Berkshire appears to have sold 13% of its Apple (NASDAQ:) shares during the quarter, ending the quarter with approximately $790 million.
The big sale is a turning point for Buffett, who is typically fearful of technology but has come to view Apple as a consumer products company with strong pricing power and loyal customers.
However, some investors have expressed concern that Apple has eaten up too much of Berkshire’s investment portfolio.
However, the sale will leave Buffett with a cash cushion of six times the minimum $30 billion he promised to keep. Berkshire made $11.2 billion in after-tax profit in the quarter from the sale of investments.
PROFIT IS GROWING
First-quarter operating income rose 39% to $11.22 billion, or about $7,807 per Class A share, from $8.07 billion a year earlier.
Net income fell 64% to $12.7 billion, or $8,838 per share, from $35.5 billion a year earlier, when Berkshire had large unrealized gains on its shares.
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An accounting rule requires Berkshire to report these profits along with its financial results. Buffett urges investors to ignore the resulting volatility.
Berkshire also bought back $2.6 billion of its own shares in the first quarter and a small amount in the first three weeks of April.
The results were released ahead of Berkshire’s annual shareholder meeting in Omaha, a weekend that draws tens of thousands of people to the city.
Buffett, 93, has led Berkshire since 1965, transforming it from a struggling textile company into a conglomerate that includes dozens of businesses, including Geico, the BNSF railroad, Berkshire Hathaway Energy, Dairy Queen and See’s Candies.
The diversification has led many investors, not just Buffett fans, to view Berkshire as a stable long-term investment, even amid recession fears and worries about the banking industry.
GEICO HELP YOU EARN
Insurance profits rose 80% to $5.2 billion. That included a more than doubling of underwriting profits at Geico, which benefited from higher rates and a significant reduction in the percentage of premiums it used to pay casualty losses.
BNSF railroad earnings fell 8%, partly due to lower fuel surcharges and “unfavorable business structure.”
Berkshire Hathaway Energy’s earnings rose 72% as improved utility operating performance helped offset rising legal costs at real estate brokerage HomeServices of America stemming from a nationwide brokerage commission settlement.
The energy business still faces billions of dollars in claims against its PacifiCorp unit over the 2020 wildfires in Oregon.
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