(Bloomberg) — Berkshire Hathaway Inc.’s cash pile has reached a new record of $157.2 billion, benefiting from higher interest rates and a lack of attractive investment opportunities for Warren Buffett. The conglomerate reported operating earnings of $10.76 billion, thanks to the impact of elevated interest rates and gains in its insurance businesses. Despite efforts to find major deals, the company has struggled to deploy its cash efficiently. Buffett has turned to share repurchases and has invested in Occidental Petroleum Corp. and Alleghany Corp. to address the shortage of appealing alternatives. Analysts believe that Berkshire will soon face pressure to put its cash to work.
Investors remain enthusiastic about Berkshire, with its Class B shares reaching a record high in September. The company’s diversified range of businesses is seen as a hedge against uncertain economic conditions. The firm has also spent $1.1 billion on buybacks in the period and made a profit of $15.7 billion on equity sales. Although Berkshire posted a loss of nearly $12.8 billion for the quarter, the company advises investors not to focus on investment gains or losses, as they can be misleading.
Berkshire operates various businesses in the US, including Geico, BNSF, Dairy Queen, and See’s Candies. The profitability of its insurance unit, along with the inclusion of Pilot Flying J earnings, has contributed to the company’s strong performance. Geico, which struggled with unprofitability in 2022, has improved its profitability by reducing advertising expenses. Berkshire’s operating earnings have exceeded expectations, despite Buffett’s warning that earnings could decline at most of its operating units this year. The firm has benefited from the Federal Reserve’s rate hikes, which have increased the yield on its cash reserves, primarily invested in short-term US Treasuries.
However, higher interest rates have had a negative impact on some of Berkshire’s industrial businesses. The conglomerate’s building products businesses experienced an 11% decline in revenue due to rising mortgage rates. Berkshire expects that certain businesses will face weakening demand and declining revenues and earnings in the coming years. Inflation has also affected other segments of the conglomerate, such as BNSF, where profit fell 15% due to lower freight volumes and increased operating costs.
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