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.
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.”
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.
A Capital One Walmart credit card sign is seen at a store in Mountain View, California, United States on Tuesday, November 19, 2019.
Yichuan Cao | Nurphoto | Getty Images
Walmart‘s majority-owned fintech startup OnePay said Monday it was launching a pair of new credit cards for customers of the world’s biggest retailer.
OnePay is partnering with Synchrony, a major behind-the-scenes player in retail cards, which will issue the cards and handle underwriting decisions starting in the fall, the companies said.
OnePay, which was created by Walmart in 2021 with venture firm Ribbit Capital, will handle the customer experience for the card program through its mobile app.
Walmart had leaned on Capital One as the exclusive provider of its credit cards since 2018, but sued the bank in 2023 so that it could exit the relationship years ahead of schedule. At the time, Capital One accused Walmart of seeking to end its partnership so that it could move transactions to OnePay.
The Walmart card program had 10 million customers and roughly $8.5 billion in loans outstanding last year, when the partnership with Capital One ended, according to Fitch Ratings.
For Walmart and its fintech firm, the arrangement shows that, in seeking to quickly scale up in financial services, OnePay is opting to partner with established players rather than going it alone.
In March, OnePay announced that it was tapping Swedish fintech firm Klarna to handle buy now, pay later loans at the retailer, even after testing its own installment loan program.
One-stop shop
In its quest to become a one-stop shop for Americans underserved by traditional banks, OnePay has methodically built out its offerings, which now include debit cards, high-yield savings accounts and a digital wallet with peer-to-peer payments.
OnePay is rolling out two options: a general-purpose credit card that can be used anywhere Mastercard is accepted and a store card that will only allow Walmart purchases.
Customers whose credit profiles don’t allow them to qualify for the general-purpose card will be offered the store card, according to a person with knowledge of the program.
OnePay didn’t yet disclose the rewards expected with the cards, though the general-purpose card is expected to provide a stronger value, said this person, who declined to be identified speaking ahead of the product’s release. The Synchrony partnership was reported earlier by Bloomberg.
“Our goal with this credit card program is to deliver an experience for consumers that’s transparent, rewarding, and easy to use,” OnePay CEO Omer Ismail said in the Monday release.
“We’re excited to be partnering with Synchrony to launch a program at Walmart that checks each of those boxes and will help serve millions of people,” Ismail said.
Check out the companies making headlines before the bell. Warner Bros. Discovery – Shares jumped nearly 9% after Warner said it will split into two publicly traded companies by next year. One company will host WBD’s streaming services and movie properties, while the other will include its cable networks such as CNN and TNT Sports. Tesla – Shares of the electric vehicle maker dropped about 2% after Baird downgraded the stock to neutral from buy. The firm said that CEO Elon Musk’s comments on robotaxi plans are “a bit too optimistic” and that Musk’s relationship to President Donald Trump adds “considerable uncertainty.” EchoStar – Shares tumbled 11% after the Wall Street Journal, citing people familiar, said the telecommunications company is considering filing for bankruptcy under chapter 11 . The company is trying to protect its wireless spectrum licenses that are under review by the Federal Communications Commission, the report said. Robinhood , Applovin – Shares of Robinhood and Applovin each fell about 4% after neither name was added to the S & P 500 on Friday, as both names were considered possible candidates for inclusion in the index . Robinhood soared more than 13% last week leading up to the rebalance announcement, while Applovin advanced more than 6%. IonQ – The quantum computing stock gained more than 7% after the company announced that it’s agreed to acquire Oxford Ionics in a deal valued at $1.075 billion in cash and stock. The deal is expected to close in 2025. McDonald’s – The fast-food chain’s stock slipped nearly 1% on the heels of a Morgan Stanley downgrade to equal weight from overweight. Morgan Stanley said the company hasn’t been insulated from pressures on the fast food sector. Moelis & Co. – Shares were marginally lower. On Monday, The Wall Street Journal reported that CEO Ken Moelis is planning to step down from the role at the investment bank. He said in an interview that he’s expected to become executive chairman, effective Oct. 1. Co-president Navid Mahmoodzadegan is slated to become CEO, the report said. — CNBC’s Alex Harring, Fred Imbert and Sarah Min contributed reporting.
People wait in line for T-shirts at a pop-up kiosk for the online brokerage Robinhood along Wall Street after the company went public with an initial public offering earlier in the day on July 29, 2021 in New York City.
Spencer Platt | Getty Images
Robinhood shares sold off on Monday as the online brokerage was snubbed in the latest quarterly rebalance of the S&P 500 Index after months of speculation that it could earn a coveted spot in the benchmark.
Shares of Robinhood dropped nearly 5% in premarket trading. The stock has rallied 3.3% Friday to bring last week’s gain to over 13% before the S&P Dow Jones Indices said after the bell that the S&P 500 would remain unchanged.
Just last week, Bank of America called Robinhood a top candidate to join the S&P 500 during the big reshuffling in June. The S&P 500 rebalance, which typically comes on the third Friday of the last month in a quarter, is usually an impactful event as it can spark billions of dollars of trading and spur passive funds to snap up its shares. Companies being added to the index can generally expect funds like that to buy huge amounts of their shares in the coming weeks.
Crypto exchange Coinbase was the latest beneficiary of such an inclusion. The stock skyrocketed 24% in the next trading session following the announcement last month.
Still, Robinhood has had a major comeback this year so far with shares doubling in price. The online brokerage’s shares hit a fresh record high last week amid a rebound in both stocks and crypto. The company had fallen out of favor after the GameStop trading mania of 2021 fizzled and the collapse of FTX triggered a sell-off in digital assets.