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Berkshire Hathaway’s cash fortress tops $300 billion as Buffett sells more stock, freezes buybacks

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Warren Buffett walks the floor ahead of the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska, on May 3, 2024.

David A. Grogen | CNBC

Berkshire Hathaway‘s monstrous cash pile topped $300 billion in the third quarter as Warren Buffett continued his stock-selling spree and held back from repurchasing shares.

The Omaha-based conglomerate saw its cash fortress swell to a record $325.2 billion by the end of September, up from $276.9 billion in the second quarter, according to its earnings report released Saturday morning.

The mountain of cash kept growing as the Oracle of Omaha sold significant portions of his biggest equity holdings, namely Apple and Bank of America. Berkshire dumped about a quarter of its gigantic Apple stake in the third quarter, making the fourth consecutive quarter that it has downsized this bet. Meanwhile, since mid-July, Berkshire has reaped more than $10 billion from offloading its longtime Bank of America investment.

Overall, the 94-year-old investor continued to be in a selling mood as Berkshire shed $36.1 billion worth of stock in the third quarter.

No buybacks

Berkshire didn’t repurchase any company shares during the period amid the selling spree. Repurchase activity had already slowed down earlier in the year as Berkshire shares outperformed the broader market to hit record highs.

The conglomerate had bought back just $345 million worth of its own stock in the second quarter, significantly lower than the $2 billion repurchased in each of the prior two quarters. The company states that it will buy back stock when Chairman Buffett “believes that the repurchase price is below Berkshire’s intrinsic value, conservatively determined.”

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Berkshire Hathaway

Class A shares of Berkshire have gained 25% this year, outpacing the S&P 500’s 20.1% year-to-date return. The conglomerate crossed a $1 trillion market cap milestone in the third quarter when it hit an all-time high.

For the third quarter, Berkshire’s operating earnings, which encompass profits from the conglomerate’s fully-owned businesses, totaled $10.1 billion, down about 6% from a year prior due to weak insurance underwriting. The figure was a bit less than analysts estimated, according to the FactSet consensus.

Buffett’s conservative posture comes as the stock market has roared higher this year on expectations for a smooth landing for the economy as inflation comes down and the Federal Reserve keeps cutting interest rates. Interest rates have not quite complied lately, however, with the 10-year Treasury yield climbing back above 4% last month.

Notable investors such as Paul Tudor Jones have become worried about the ballooning fiscal deficit and that neither of the two presidential candidates squaring off next week in the election will cut spending to address it. Buffett has hinted this year he was selling some stock holdings on the notion that tax rates on capital gains would have to be raised at some point to plug the growing deficit.

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Stocks making the biggest moves midday: AAL, AVGO, JPM

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Biggest banks planning to sue the Federal Reserve over annual stress tests

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A general view of the Federal Reserve Building in Washington, United States.

Samuel Corum | Anadolu Agency | Getty Images

The biggest banks are planning to sue the Federal Reserve over the annual bank stress tests, according to a person familiar with the matter. A lawsuit is expected this week and could come as soon as Tuesday morning, the person said.

The Fed’s stress test is an annual ritual that forces banks to maintain adequate cushions for bad loans and dictates the size of share repurchases and dividends.

After the market close on Monday, the Federal Reserve announced in a statement that it is looking to make changes to the bank stress tests and will be seeking public comment on what it calls “significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.”

The Fed said it made the determination to change the tests because of “the evolving legal landscape,” pointing to changes in administrative laws in recent years. It didn’t outline any specific changes to the framework of the annual stress tests.

While the big banks will likely view the changes as a win, it may be too little too late.

Also, the changes may not go far enough to satisfy the banks’ concerns about onerous capital requirements. “These proposed changes are not designed to materially affect overall capital requirements, according to the Fed.

The CEO of BPI (Bank Policy Institute), Greg Baer, which represents big banks like JPMorgan, Citigroup and Goldman Sachs, welcomed the Fed announcement, saying in a statement “The Board’s announcement today is a first step towards transparency and accountability.”

However, Baer also hinted at further action: “We are reviewing it closely and considering additional options to ensure timely reforms that are both good law and good policy.”

Groups like the BPI and the American Bankers Association have raised concerns about the stress test process in the past, claiming that it is opaque, and has resulted in higher capital rules that hurt bank lending and economic growth.

In July, the groups accused the Fed of being in violation of the Administrative Procedure Act, because it didn’t seek public comment on its stress scenarios and kept supervisory models secret.

CNBC’s Hugh Son contributed to this report.

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Stocks making the biggest moves midday: Nordstrom, Honda, MicroStrategy, Broadcom and more

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These are the stocks posting the largest moves in midday trading.

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