Connect with us

Finance

Berkshire’s cash pile could top $200 billion as Buffett sells stock

Published

on

Warren Buffett walks the floor and meets with Berkshire Hathaway shareholders ahead of their annual meeting in Omaha, Nebraska on May 3rd, 2024. 

David A. Grogan

Berkshire Hathaway‘s highly scrutinized cash pile could top $200 billion — more than the entire annual gross domestic product of Hungary — amid CEO Warren Buffett’s rare sale of some of his favorite stocks.

The Omaha-based conglomerate is likely to say its cash hoard topped the previous record of $189 billion, set in the first quarter, when it reports second-quarter earnings Saturday morning. Berkshire’s results come at a time when Buffett has been offloading winning investments in Apple, Bank of America and BYD, leading some to believe the Oracle of Omaha has grown concerned that the bull market is overheated.

“It does look like he wants to de-risk the portfolio a little bit,” Bill Stone, chief investment officer at Glenview Trust Company and a Berkshire shareholder, said early in the week. “He’s trimming two top holdings and you don’t get anything more economically sensitive than the banks. The market seems so sure right now of a soft landing, and maybe he’s taking more of a contrarian view.”

Berkshire has been a net seller of stocks for six straight quarters. Notably, Buffett trimmed his massive Apple bet by 13% in the first quarter for tax reasons after reaping enormous gains. The selling could have resumed in the second quarter as shares of the iPhone maker jumped 23% in the period.

Meanwhile, in a surprising move, the conglomerate recently started dumping Bank of America shares — its second-biggest holding after Apple. Over the past 12 trading sessions, Berkshire has sold $3.8 billion of the Charlotte-based bank’s shares. (The BofA sales began in July and won’t be reflected in the second-quarter report.)

Buffett’s gigantic war chest has been earning sizeable returns thanks to the jump in Treasury yields over the past two years, but with interest rates set to decline from multiyear highs, his mounting cash pile could once again draw questions. If invested in three-month Treasury bills at about 5%, $200 billion in cash would generate about $10 billion a year, or $2.5 billion a quarter, but those returns are set to decline once the Federal Resewrve starts lowering interest rates.

“It’s just a question of how long they are going to sit on it,” Andrew Kligerman, TD Cowen’s Berkshire analyst, said in an interview, referring to Berkshire’s enormous cash pile.

‘Things aren’t attractive’

Buffett, who turns 94 at the end of the month, confessed at Berkshire’s annual meeting in May that he’s open to putting more capital to work, but high prices give him pause.

“I think it’s a fair assumption that [cash holdings] will probably be about $200 billion at the end of this quarter,” the investment icon said at the time. “We’d love to spend it, but we won’t spend it unless we think [a business is] doing something that has very little risk and can make us a lot of money… it isn’t like I’ve got a hunger strike or something like that going on. It’s just that…things aren’t attractive.”

Stock Chart IconStock chart icon

hide content

Berkshire Hathaway

Weakness in non-insurance

Investors will also closely study the quarterly results for Berkshire’s BNSF Railway and Berkshire Hathway Energy utility business, which recently showed signs of weakness. BNSF is grappling with wage increases and revenue declines, while BHE faces pressure from being held liable for damage caused by wildfires.

“The non-insurance side will weigh on the results, whether it’s the sluggish volumes in railroad coupled with higher labor costs, or utilities, which could put up a good quarter, but nobody’s going to be excited about that just given the liability exposure,” said TD Cowen’s Kligerman, who recently initiated research coverage of Berkshire with a hold rating.

Conversely, Berkshire’s insurance business has been a bright spot, with a 185% year-over-year increase in insurance underwriting earnings in the first quarter.

Shares of Berkshire have rallied more than 21% this year, outperforming the S&P 500’s 14% return, through Thursday. The conglomerate’s market capitalization has ballooned to $956 billion, close to joining the tiny number of U.S. stocks valued at $1 trillion or more.

Don’t miss these insights from CNBC PRO

Continue Reading

Finance

Trade tensions not stopping Chinese companies from pushing into U.S.

Published

on

The Insta360 One R displayed in a container of water at the Insta360 booth during CES 2020 at the Las Vegas Convention Center on Jan. 8, 2020.

David Becker | Getty Images News | Getty Images

BEIJING — Chinese companies are so intent on global expansion that even the biggest stock offering to date on Shanghai’s tech-heavy STAR board counts the U.S. as one of its biggest markets, on par with China.

Shenzhen-based camera company Insta360, a rival to GoPro, raised 1.938 billion yuan ($270 million) in a Shanghai listing Wednesday under the name Arashi Vision. Shares soared by 274%, giving the company a market value of 71 billion yuan ($9.88 billion).

The United States, Europe and mainland China each accounted for just over 23% of revenue last year, according to Insta360, whose 360-degree cameras officially started Apple Store sales in 2018. The company sells a variety of cameras — priced at several hundred dollars — coupled with video-editing software.

Co-founder Max Richter said in an interview Tuesday that he expects U.S. demand to remain strong and dismissed concerns about geopolitical risks.

“We are staying ahead just by investing into user-centric research and development, and monitoring market trends that ultimately meet the consumer[‘s] needs,” he told CNBC ahead of the STAR board listing.

China launched the Shanghai STAR Market in July 2019 just months after Chinese President Xi Jinping announced plans for the board. The Nasdaq-style tech board was established to support high-growth tech companies while raising requirements for the investor base to limit speculative activity.

The Comac Question: Can China's planemaker be a competitor to Boeing & Airbus?

In 2019, only 12% of companies on the STAR board said at least half of their revenue came from outside China, according to CNBC analysis of data accessed via Wind Information. In 2024, with hundreds more companies listed, that share had climbed to more than 14%, the data showed.

“We are just seeing the tip of the iceberg. More and more capable Chinese firms are going global,” said King Leung, global head of financial services, fintech and sustainability at InvestHK.

Leung pointed to the growing global business of Chinese companies such as battery giant CATL, which listed in Hong Kong last month. “There are a lot of more tier-two and tier-three companies that are equally capable,” he said.

InvestHK is a Hong Kong government department that promotes investment in the region. It has organized trips to help connect mainland Chinese businesses with overseas opportunities, including one to the Middle East last month.

Roborock, a robotic vacuum cleaner company also listed on the STAR board, announced this month it plans to list in Hong Kong. More than half of the company’s revenue last year came from overseas markets.

At the Consumer Electronics Show in Las Vegas this year, Roborock showed off a vacuum with a robotic arm for automatically removing obstacles while cleaning floors. The device was subsequently launched in the U.S. for $2,600.

Other consumer-focused Chinese companies also remain unfazed by heighted tensions between China and the U.S.

In November, Chinese home appliance company Hisense said it aimed to become the top seller of television sets in the U.S. in two years. And last month, China-based Bc Babycare announced its official expansion into the U.S. and touted its global supply chain as a way to offset tariff risks.

New phase of expansion

Chinese companies have been pushing overseas in the last several years, partly because growth at home has slowed. Consumer demand has remained lackluster since the Covid-19 pandemic.

But the expansion trend is now evolving into a third stage in which the businesses look to build international brands on their own with offices in different regions hiring local employees, said Charlie Chen, managing director and head of Asia research at China Renaissance Securities.

He said that’s a change from the earliest years when Chinese companies primarily manufactured products for foreign brands to sell, and a subsequent phase in which Chinese companies had joint ventures with foreign companies.

Weekly analysis and insights from Asia’s largest economy in your inbox
Subscribe now

Insta360 primarily manufactures out of Shenzhen, but has offices in Berlin, Tokyo and Los Angeles, Richter said. He said the Los Angeles office focuses on services and marketing — the company held its first big offline product launch in New York’s Grand Central Terminal in April.

Chen also expects the next phase of Chinese companies going global will sell different kinds of products. He pointed out that those that had gone global primarily sold home appliances and electronics, but are now likely to expand significantly into toys.

Already, Beijing-based Pop Mart has become a global toy player, with its Labubu figurine series gaining popularity worldwide.

Pop Mart’s total sales, primarily domestic, were 4.49 billion yuan in 2021. In 2024, overseas sales alone surpassed that to hit 5.1 billion yuan, up 373% from a year ago, while mainland China sales climbed to 7.97 billion yuan.

“It established another Pop Mart versus domestic sales in 2021,” said Chris Gao, head of China discretionary consumer at CLSA.

The Hong Kong-listed retailer doesn’t publicly share much about its global store expansion plans or existing locations, but an independent blogger compiled a list of at least 17 U.S. store locations as of mid-May, most of which opened in the last two years.

The toy company has been “very good” at developing or acquiring the rights to characters, Gao said. She expects its global growth to continue as Pop Mart plans to open more stores worldwide, and as consumers turn more to such character-driven products during times of stress and macroeconomic uncertainty.

Continue Reading

Finance

State AGs urge Meta to clean up platform

Published

on

New York Attorney General Letitia James speaks during a press conference at the office of the Attorney General on July 13, 2022 in New York City.

Michael M. Santiago | Getty Images

A group of 42 state attorneys general are calling on Meta to curb the rise of investment scams on Facebook that fraudulently use the images of Warren Buffett and other famous figures, New York Attorney General Letitia James said Wednesday.

James said in a news release criminals are consistently evading Meta’s automated and human review systems to post fake ads that leave retail investors saddled with millions of dollars in losses. Her office continues to see the scams months after reporting them to Meta, she added.

The ads, touting access to Buffett, Elon Musk or Ark Invest’s Cathie Wood, lure Facebook users to join chat groups on Meta-owned messaging platform, WhatsApp, according to the New York AG.

There, users are unwittingly involved in alleged pump-and-dump schemes, where criminals boost the price of thinly traded stocks and quickly sell for a profit, leaving small investors with losses.

Meta, the parent company of Facebook, Instagram and WhatsApp, is struggling to control the rise of cyber scams on its platforms and is a “cornerstone of the internet fraud economy,” the Wall Street Journal reported last month. The problem is global in nature, with one notable lawsuit being brought by an Australian billionaire who alleges that Meta’s artificial intelligence-run advertising program created and amplified false ads using his likeness.

“Thousands of Facebook users have lost hundreds of millions of dollars to these scams and Meta must do more to stop these fraudulent ads from running on its platforms,” James said. “I am leading a bipartisan coalition calling on Meta to step up its review of ads to stop these scams. I also urge all New Yorkers to be extra careful before putting their money in investments they see advertised on social media.”

Source: New York State Attorney General’s office

The AGs urged Meta to boost its policing of ads, including with more human review, saying that unless they curb the scams, Meta should stop running investment ads altogether.

Joining James were AGs from states including California, Connecticut, Georgia, Massachusetts, Michigan, New Jersey and Pennsylvania.

Continue Reading

Finance

Stocks making the biggest moves midday: OKLO, CHWY, QUBT, GTLB

Published

on

Continue Reading

Trending