Berkshire Hathaway’s 2nd-quarter earnings reveal that Warren Buffett is facing challenges in discovering bargains.

  • According to Berkshire Hathaway’s earnings report, Warren Buffett encountered limited opportunities for bargains in the second quarter.
  • The investor’s company offloaded a net total of $8 billion in stocks and allocated merely $1.4 billion for buybacks.
  • As a consequence, Berkshire’s cash reserves surged by 13%, reaching an impressive near-record of $147 billion.

Warren Buffett faced continued challenges in finding bargains during the last quarter as the stock market surged higher, according to Berkshire Hathaway’s second-quarter earnings report released on Saturday.

The renowned investor and his team made significant sales of stocks, totaling $8 billion on a net basis in the previous quarter. They decided to part ways with nearly $13 billion worth of shares while acquiring less than $5 billion worth of new investments. Furthermore, their stock buybacks were reduced to just $1.4 billion, a notable drop from the previous quarter’s $4 billion. This decline in buybacks can be attributed to Berkshire’s stock price rising during the period, which made it a less attractive opportunity for repurchasing.

As a result of the cuts to its stock portfolio and the slower pace of repurchases, Berkshire’s cash pile grew by 13% to reach $147 billion by the end of June 30. This figure is the second-highest reported to date, coming close to the record $149 billion held in late 2021.

The substantial increase in the conglomerate’s total cash and Treasury bills usually signifies that Buffett and his team didn’t come across many favorable deals in the stock market or acquisition opportunities during the period. The struggle to find appealing investments highlights the challenging market conditions faced by the veteran investor and his compatriots.

Many investors consider Buffett’s company as a microcosm of the US economy due to its ownership of a vast array of businesses across various industries. In the last quarter, Berkshire’s operating earnings showed a promising 7% year-on-year increase, reaching $10 billion. This growth was primarily driven by a surge in underwriting and investment income from its insurance division. However, earnings from the BNSF Railway experienced a decline, and the profits from the energy division remained almost unchanged.

Pilot Travel Centers played a significant role in boosting Berkshire’s performance. After increasing its stake in the truck-stop chain to 80% in January, Pilot contributed around $15 billion in revenue and $114 million in earnings during the last quarter.

This year, Buffett and his team have adopted a more cautious approach to spending. In 2022, they made substantial investments, with a record-breaking $68 billion allocated to stocks or $34 billion on a net basis. Additionally, they acquired Alleghany for $12 billion and conducted stock repurchases of nearly $8 billion.

However, the situation has shifted in contrast this year. In the first six months, Berkshire sold over $18 billion of stock on a net basis. Furthermore, their net Treasury purchases decreased to about $27 billion last quarter, down from the $33 billion seen in the first quarter. This slowdown in spending indicates a more reserved strategy and a cautious approach to investment decisions.

This week, in response to Fitch downgrading America’s credit rating from AAA to AA+, Buffett reassured The Trading Nation that he remained unperturbed by the development. He emphasized that Berkshire’s approach to spending on Treasuries remained unchanged, and they were continuing to invest the same amount each week.