Berkshire Hathaway’s Q4 Earnings: Cash Pile Grows as Buffett Stays Selective

Berkshire Hathaway’s fourth-quarter earnings report showcased another strong performance, driven by higher interest rates boosting investment income and a significant turnaround in its insurance business. Operating earnings surged 71 percent year-over-year to 14.5 billion dollars, with the insurance segment playing a key role in the gains. The conglomerate’s cash reserves soared to a record 334.2 billion dollars, marking the 10th consecutive quarter of growth as Warren Buffett continues to build up liquidity while waiting for the right opportunities. However, despite the impressive financial results, Buffett remains cautious about valuations, choosing to be a net seller of stocks and limiting new acquisitions.

Cash Strategy: A Decade-Long High in Reserves

Berkshire Hathaway’s cash stockpile has grown relentlessly, hitting $334.2 billion dollars by the end of 2024. This marks the 10th straight quarter of cash growth, a clear signal that Buffett sees few attractive investment opportunities in the current market. The company was a net seller of $6.7 billion dollars in equities during the quarter, continuing a trend of limited stock purchases.

In his annual letter to shareholders, Buffett addressed concerns about Berkshire’s massive cash reserves, emphasizing that while the figure appears staggering, the majority of the company’s money remains invested in equities. He assured investors that Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned. However, with limited opportunities to deploy capital, Berkshire has opted to increase its holdings of U.S. Treasury bills, benefiting from rising interest rates that have enhanced investment income.

Berkshire’s marketable equity portfolio declined by 23 percent to $272 billion dollars, reflecting Buffett’s restrained approach to new stock investments. Meanwhile, the firm’s non-public, controlled businesses saw a modest increase in value, reinforcing the long-term strategy of holding onto high-quality assets rather than chasing overpriced opportunities in public markets.

Where Does Buffett See Value

While Buffett has largely stayed on the sidelines in the U.S. stock market, Berkshire is expanding internationally. The company signaled a willingness to increase its stake in Japan’s five largest trading houses—Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. Originally acquired in 2019, these investments have performed well, with their combined market value rising to $23.5 billion dollars from an initial $13.8 billion dollar investment.

Initially, Berkshire pledged to keep its stake below 10 percent in each firm, but the Japanese companies have since agreed to relax that threshold, allowing for additional investment. Buffett has praised their capital discipline, particularly their consistent buybacks and dividend increases, as well as their conservative management practices, which contrast with their U.S. counterparts.

Despite accumulating record cash, Buffett has not resumed share repurchases for the second consecutive quarter, indicating that he views Berkshire’s stock as trading above its intrinsic value. Meanwhile, large acquisitions remain elusive, as high valuations have kept him from making a major deal.

How Did Berkshire’s Businesses Perform

Despite the overall earnings surge, Buffett noted that 53 percent of Berkshire’s 189 operating businesses reported a decline in earnings in 2024. However, strong results in insurance, railroads, and utilities offset some of the softness in consumer-facing businesses.

Insurance: The Bright Spot of Q4

Insurance underwriting profits skyrocketed by 302 percent year-over-year to $3.4 billion dollars, driven by a remarkable turnaround at GEICO, which saw its pretax underwriting profit more than double to $7.8 billion dollars. The auto insurer has been adding new customers, reversing a period of declining policy growth. Reinsurance operations also posted a 44 percent increase in pretax underwriting earnings.

Investment income from insurance surged nearly 50 percent to $4.1 billion dollars, thanks to higher Treasury yields. Despite the gains, Berkshire estimated a $1.3 billion dollar pretax loss from the Los Angeles wildfires in late 2024, reminding investors of the volatility in the insurance business.

Burlington Northern Santa Fe Railroad

BNSF, one of Berkshire’s largest wholly owned subsidiaries, posted a slight earnings increase, with $5.03 billion dollars in full-year profits. While revenue growth was muted, cost controls helped stabilize earnings. Buffett noted there is still room for operational improvement within the railroad segment.

Berkshire Hathaway Energy

Berkshire’s utility arm, BHE, saw earnings jump to $3.7 billion dollars from $2.3 billion dollars, reflecting stability in the energy sector. The company bought the remaining shares of its utility business for $3.9 billion dollars last year, reinforcing its commitment to long-term infrastructure investments.

Consumer and Retail Businesses

While Berkshire’s industrial, consumer products, and retail businesses remained profitable, they struggled in a slowing economy. Analysts have pointed out that if Berkshire’s subsidiaries serve as a barometer for the broader U.S. economy, the earnings softness in these sectors suggests economic deceleration.

Net Income and Shareholder Returns

Berkshire reported $19.69 billion dollars in net profit for Q4, translating to $13,695 dollars per Class A share. This was down from $37.57 billion dollars a year ago, though much of the volatility stems from the accounting treatment of Berkshire’s stock investments. Buffett has long urged investors to focus on operating earnings, which rose 71 percent in Q4 and 27 percent for the full year to $47.4 billion dollars.

Succession Planning: Greg Abel’s Role

At 94 years old, Buffett acknowledged that his time as CEO is nearing its end, but he reassured investors that Berkshire is in good hands with Greg Abel. In his annual letter, Buffett expressed full confidence in Abel, stating that he shares Berkshire’s long-term vision and will be ready to act decisively when opportunities arise. He also affirmed that Abel will continue the tradition of writing the annual shareholder letter, maintaining the level of transparency investors have come to expect.

Looking Ahead: Patience and Selectivity

Buffett remains cautious about asset prices, opting to sit on a growing pile of cash while awaiting better valuations. The record $334.2 billion dollars in cash ensures that Berkshire can act aggressively when the right opportunity arises, whether through a large acquisition, equity investments, or internal business expansion.

While some analysts view Buffett’s reluctance to deploy capital as bearish on the market, others argue that it positions Berkshire to strike when valuations become favorable. With strong earnings from insurance, a disciplined investment strategy, and a deep bench of leadership, Berkshire Hathaway remains a fortress of financial strength in uncertain times.