Berkshire cash sets record as profit rises, signaling caution ahead of Buffett exit
By Jonathan Stempel
(Reuters) -Berkshire Hathaway signaled on Saturday that it remained cautious about markets, letting cash swell to a record $381.7 billion even as profit rose, in its last financial report before Warren Buffett bows out as chief executive.
For a 12th straight quarter, Buffett's conglomerate sold more stocks than it bought for its $283.2 billion equity portfolio, whose holdings include Apple and American Express.
Berkshire also did not repurchase any of its own stock, the fifth straight quarter without buybacks, though its stock price has significantly lagged the broader market.
Lower insurance losses helped boost third-quarter operating profit 34% to $13.49 billion, topping analyst forecasts, while net income grew 17% to $30.8 billion.
But revenue grew just 2%, slower than the overall U.S. economy's growth rate.
Economic uncertainty and waning consumer confidence have been drags, Berkshire said, stalling sales growth at the Clayton Homes homebuilder and reducing revenue from Duracell batteries, Fruit of the Loom apparel and Squishmallows toymaker Jazwares.
"Berkshire, which is often considered a microcosm of the U.S. economy, isn't even keeping up," said Cathy Seifert, a CFRA Research analyst with a "hold" rating on Berkshire. "Investors will struggle to find a catalyst for this stock."
BUFFETT PREPARING TO BOW OUT, ABEL TO TAKE OVER
Buffett, 95, is letting cash build up as he prepares to end his six-decade tenure as chief executive at the end of the year.
Vice Chairman Greg Abel, 63, will succeed the legendary investor, though Buffett will remain chairman.
Abel is known as a more hands-on manager than Buffett.
It is unclear what he will do with Omaha, Nebraska-based Berkshire's cash, with options potentially including paying the $1.03 trillion conglomerate's first dividend since 1967.
Berkshire is planning to use $9.7 billion of cash to buy Occidental Petroleum's OxyChem chemicals business, a transaction announced on October 2.
James Shanahan, an Edward Jones analyst who upgraded his Berkshire rating to "buy" in September, said the company's resistance to spending more cash during this year's market rally has been disappointing.
"If you feel like stocks are expensive, including your own shares, you're eventually going to be right, but you can be wrong for a long time, and that's what happened here," he said.
NET INCOME RISES, HELPED BY GAINS ON STOCKS
The $13.49 billion quarterly operating profit, or about $9,376 per Class A share, grew from $10.09 billion a year earlier. Currency fluctuations accounted for more than two-fifths of the increase.
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