FX168 Financial News (North America) - Berkshire Hathaway's cash reserves have reached a historic high of $325.2 billion as Warren Buffett quickly exits one of the most profitable trades in the past decade.
"Oracle of Omaha" and his conglomerate holding company Berkshire Hathaway began selling Apple stocks at the end of last year, reducing a major bet on the technology company established in 2016.
According to the Financial Times, Berkshire accelerated its selling earlier this year, halving its Apple shares by the end of the second quarter, helping its cash reserves reach a historic high of $277 billion at the time.
However, by the end of the third quarter, Berkshire Hathaway sold a quarter of its Apple shares, which is 0.1 billion shares, reducing its total shares from 0.4 billion shares to 0.3 billion shares, breaking its previous cash record.
Within just over a year, the company has sold over two-thirds of its holdings in Apple. Despite still being its largest holding in the tech company, valued at $69.9 billion, Apple accounted for $178 billion in Berkshire Hathaway's investment portfolio at its peak.
As Buffett significantly reduced his stock holdings, the selling frenzy of Apple followed suit. According to CNN, in the third quarter, Berkshire only purchased $1.5 billion worth of stocks, becoming a net seller of stocks for the eighth consecutive quarter.
According to Berkshire's latest earnings report, its $325.2 billion cash and short-term government bond holdings currently exceed the market value of its stocks. As of the end of the third quarter, its stock market capitalization was $271.6 billion. Despite concerns about Berkshire's large-scale stock sales, the company has performed well in the past three years, with a 52% increase in stock price, surpassing the 22% increase in the S&P 500 index during the same period.
A significant reason for the large-scale stock sales is Buffett's prediction that capital gains tax rates will rise in the coming years, possibly to help reduce the federal deficit, which accounts for approximately 122% of the country's GDP as of 2023.
"I believe that the current fiscal policy must make concessions, and I think it is very likely to increase taxes," Buffett said at the Berkshire Hathaway annual shareholders meeting in May.
Vice President Kamala Harris said that if elected president, she would raise the corporate tax rate from 21% to 28%. Meanwhile, former President Donald Trump vowed to lower the corporate tax rate for companies producing goods in the United States to 15%.
Buffett stated that Berkshire Hathaway will keep Apple as its largest investment, but he added that he wants to hold more cash at hand.
"But under the current circumstances, I don't mind building a cash position," Buffett said in May. "I believe that when I see the alternatives in the stock market and the composition of what is happening in the world, we find it quite attractive."
Although Buffett mentioned at the May meeting that the capital gains tax rate paid by investors when selling assets such as stocks may increase, he is ultimately not worried.
"We have always wanted Berkshire to pay a large amount of federal income tax, we believe it is appropriate," he said.
