As Warren Buffett prepares to step down as CEO of Berkshire Hathaway at the end of 2025, the conglomerate is making a significant strategic shift. By methodically selling off massive portions of its stakes in market giants like Apple and Bank of America, Berkshire has accumulated an unprecedented cash position, now exceeding $320 billion, primarily held in U.S. Treasury bills.
This move signals a pivot toward safety and liquidity, providing incoming CEO Greg Abel with an enormous reserve of capital for future investments and acquisitions as a new era begins for the nearly trillion-dollar company.
Key Takeaways
- Berkshire Hathaway's cash and short-term investments have swelled to over $320.5 billion, a record high for the company.
- The cash pile was primarily funded by significant sales of its positions in Apple and Bank of America stock.
- Warren Buffett has favored U.S. Treasury bills, which currently offer yields above 3.8%, prioritizing safety over potentially riskier equity returns.
- This massive capital reserve, often called "dry powder," positions new CEO Greg Abel to pursue large-scale deals when opportunities arise.
A Strategic Shift From Market Darlings
In a series of calculated moves over the past two years, Berkshire Hathaway has been reducing its exposure to some of its most successful investments. The company has trimmed its once-dominant position in Apple, a stock that at one point accounted for over half of its equity portfolio.
Since late 2023, Berkshire has sold nearly 70% of its Apple holdings. The decision appears linked to valuation concerns. When Buffett first invested in the iPhone maker in 2016, its stock traded at a price-to-earnings (P/E) ratio near 10. Today, that ratio has climbed to over 33, a level that suggests a much higher premium for its expected growth.
Valuation and Profit-Taking
An investor's decision to sell a winning stock is often tied to its valuation. A high P/E ratio can indicate that a stock's price is high relative to its earnings, potentially limiting future returns. By selling, investors lock in gains and reduce risk if the market corrects.
A similar strategy has been applied to Bank of America. Buffett's relationship with the bank began in 2011 with a savvy preferred stock investment. While Berkshire increased its common stock holdings through 2020, it has been a consistent seller every quarter since mid-2024.
Currently, Berkshire holds less than 60% of its peak stake in the financial institution. The bank's stock is now trading at 1.8 times its tangible book value, a metric it has not reached since 2022 and significantly above its ten-year average of approximately 1.5.
The $320 Billion Bet on Safety
The proceeds from these large-scale stock sales have not been redeployed into other equities. Instead, they have been channeled into one of the safest assets available: U.S. Treasury bills.
As of the end of the third quarter, Berkshire Hathaway's balance sheet showed an astounding $320.5 billion in U.S. T-bills. This figure represents a steady increase, up from $310.6 billion in the previous quarter. In total, over the last three years, Berkshire's stock sales have exceeded its purchases by more than $183 billion.
The yield on short-term U.S. Treasury bills currently exceeds 3.8%, offering a competitive, low-risk return compared to the broader stock market's potential.
Buffett has consistently emphasized the importance of liquidity and safety for Berkshire's short-term investments. In his quarterly reports, he often states a core principle for the company's cash management.
"We continue to believe that maintaining ample liquidity is paramount and we insist on safety over yield with respect to short-term investments."
This philosophy explains the preference for short-term T-bills over longer-dated bonds. While longer-term bonds might offer slightly higher yields, their prices are more sensitive to interest rate fluctuations, introducing a level of risk Buffett is currently unwilling to take with Berkshire's capital reserves.
Setting the Stage for a New Era
While Buffett still prefers owning businesses through equities over the long term, the current market landscape presents a challenge. The earnings yield of the S&P 500, a measure of return, is approximately 4.4% based on forward estimates. This is not substantially higher than the risk-free rate offered by T-bills, making large-scale stock purchases less compelling.
This is especially true for a company the size of Berkshire, which needs to make multi-billion dollar investments to have a meaningful impact on its overall performance. Finding attractively priced companies of that scale has become increasingly difficult.
Berkshire has not stopped deal-making entirely. The company recently invested $9.7 billion to acquire Occidental Petroleum's subsidiary, OxyChem. However, deals of this magnitude are rare.
Dry Powder for Greg Abel
The enormous cash hoard serves another crucial purpose: it equips incoming CEO Greg Abel with immense financial firepower. When market conditions change or a significant acquisition opportunity appears, Berkshire will be one of the few entities with the capital to act decisively.
This strategic positioning ensures that Berkshire Hathaway can maintain its core strategy of acquiring great businesses at fair prices, even as its legendary leader prepares to transition out of his role. The $320 billion war chest is Buffett's final masterstroke, securing the company's foundation for the next generation of leadership.
