In his missive to stakeholders sent out in February,
Warren Buffett
announced a new record
Berkshire Hathaway
(NYSE: BRK.A)
(NYSE: BRK.B)
Set in 2024: This entity remitted higher taxes to the U.S. government than any corporation had ever done in one fiscal year. Interestingly, this occurred even though current tax rates have notably decreased compared to those during most of Berkshire Hathaway’s existence.
Certainly, covering a substantial tax payment indicates that significant funds were generated for your investors. However, with respect to Berkshire Hathaway, many of these profits arrived in the shape of
capital gains
In regard to the sale of publicly traded stocks, Buffett along with his team of portfolio managers offloaded securities valued at $143 billion from Berkshire’s holdings. This transaction led to taxable profits totaling $101.1 billion, significantly surpassing previous earnings and outstripping typical operational revenues.
Where should you put your $1,000 investment at this moment?
Our analysis group has just disclosed their thoughts on what they consider to be the
10 best stocks
to buy right now.
Learn More »
In the final quarter, Buffett significantly reduced his holdings in various stocks.
financial stocks
including
Bank of America
and
Citigroup
. At the same time, he’s piled any cash leftover after Berkshire’s massive tax bill into one high-yield investment.
This is what investors should be aware of.
Financial stocks are up for discussion at Berkshire.
Throughout 2024, Buffett disposed of at least some shares from approximately half of the stocks and exchange-traded funds that Berkshire owned at the beginning of the year.
Apple
observed the most substantial reduction within the investment portfolio; however, Berkshire’s share in the technology stock continues to be its predominant holding. Following the trimming of more than two-thirds of their investments, Berkshire appears content with retaining approximately 300 million shares. In the final quarter, he did not offload additional Apple stocks.
Instead, he focused on Berkshire’s holdings in financial sector stocks. The biggest reductions were seen in Bank of America and Citigroup. However, Berkshire also decreased its position inCitizens
Capital One Financial
and Brazilian
fintech stock
Nu Holdings
.
Berkshire initially obtained Bank of America shares through
warrants
It got when it acquired $5 billion worth of
preferred stock
In 2011, Buffett used those warrants in 2017 to acquire 700 million shares after Bank of America raised its dividend, making ownership of common stock more profitable compared to holding preferred shares. Berkshire Hathaway continued adding to this stake until 2020; however, by the close of 2024, they held fewer than the initial 700 million shares bought back in 2017.
A few people have theorized that Berkshire might have been continuing to sell shares of Bank of America early in 2025. In his shareholder letter, Buffett made mention of several profitable companies well-known to households, but the firm’s name did not appear among them.
Berkshire Hathaway recently added Citigroup to its portfolio in early 2022. However, the bank’s shares struggled through both 2022 and 2023 due to regulatory issues, significant organizational changes, and an unfavorable economic climate. It seems that Warren Buffett and his team might not have seen sufficient improvement in Citigroup’s recovery efforts, leading them to begin reducing their stake in the company.
Buffett has indicated that 2024 and 2025 might be ideal times to begin offloading some of Berkshire’s largest stakes. Many of these major corporations in the market are currently overvalued.
valuation
However, Berkshire can retain more of its profits due to consistently low tax rates. In 2024, Berkshire’s $101 billion in gains were taxed at just 21%. Prior to 2017, such gains would have been subject to a 35% tax rate instead. This amounts to an additional $14 billion added to Berkshire’s funds.
Buffett may continue to sell in 2025 as valuations remain high and Congress has yet to extend the current tax cuts beyond the end of the year. As of the end of 2024, Berkshire’s portfolio was valued at $271.6 billion with unrealized capital gains of $196 billion. If he continues to sell, he clearly has a favorite place to put that cash right now.
The substantial investment that Buffett just can’t stop purchasing.
In 2024, Berkshire Hathaway disposed of approximately $143 billion worth of stocks, whereas its overall spending on new equity investments was merely $9.2 billion throughout the same period. Additionally, neither Buffett nor his associates have made significant additional acquisitions noticeable beyond what’s listed within Berkshire’s publicly traded securities holdings. As per the company’s leader, this trend continues.
stopped repurchasing Berkshire shares
In May, it allocated small sums of capital to illiquid equity investments, including shares in Pilot Travel Centers and Berkshire Hathaway Energy.
With no appealing equity options available for investment, Buffett finds himself sitting on a substantial amount of cash.
In his view, the most suitable action for him to take with that money at present would be to purchase short-term U.S. bonds.
Treasury bills
Buffett prefers short-term government bonds for holding extra funds. Each quarter, he informs his shareholders, “We still hold the view that keeping sufficient liquidity is crucial, and we prioritize security over returns when it comes to our short-term investments.”
In the 1970s, Buffett suffered losses from long-term bonds and since then has preferred short-term bonds. These shorter-term bonds generally offer lower returns, but they guarantee the safety of capital because they are less exposed to interest rate fluctuations similar to those experienced in the 1970s and more recently.
In 2024, Buffett boosted Berkshire’s Treasury bill portfolio by more than $166 billion. Even though he prefers short-term instruments, Buffett is now earning significant returns from these Treasury bills. Currently, T-bills set to mature in less than half a year provide yields equivalent to those of 10-year Treasury notes — approximately 4.3% at present. Consequently, Berkshire is being well-compensated as Buffett holds off on making attractive equity investments.
However, Buffett has mentioned that he would be content holding Treasury securities even without their appealing returns. At last year’s shareholder gathering, he stated, “None of us up here know how to deploy [the cash] profitably, so we choose not to use it.”
Buffett and his team at Berkshire Hathaway confront a distinct challenge: Given their available investment funds exceeding $334 billion, they have limited options when choosing stocks capable of significantly impacting Berkshire’s portfolio performance. Over the past year—and particularly in recent quarters—this has been Buffetts prevailing inclination.
leaned toward smaller companies
However, even by investing several billion dollars in these stocks and acquiring significant shares in each of them, it would be hard pressed to compensate for the revenues lost from the large corporations that Buffett deems unworthy of investment at current valuations.
Therefore, Buffett invested heavily in Treasury bills and is likely to keep doing this through 2025 untilmegacap stocks, where Buffett has the potential for significant action, begin offering attractive returns to shareholders once more.
Don’t let this second chance for a possibly profitable opportunity slip away.
Have you ever felt like you’ve missed out on purchasing the most profitable stocks? If so, you should definitely listen to this.
From time to time, our skilled group of analysts releases a
“Double Down” stock
Here’s a suggestion for firms that seem poised for significant growth. Don’t fret if you believe you might have missed out; this could be an ideal moment to purchase stocks before it becomes unfeasible. The data clearly supports this approach.
-
Nvidia:
If you had invested $1,000 when we increased our investment in 2009,
you’d have $277,401
!* -
Apple:
If you had put in $1,000 when we increased our investment in 2008,
you’d have $43,128
!* -
Netflix:
If you had invested $1,000 when we increased our investment in 2004,
you’d have $467,393
!*
Currently, we’re sending out “Double Down” alerts for three amazing companies, and such an opportunity might not come around again anytime soon.
Continue »
*Stock Advisor returns as of March 10, 2025
Citigroup serves as an advertising partner for Motley Fool Money. Similarly, Bank of America also partners with Motley Fool Money for advertisements.
Adam Levy
has investments in Apple. The Motley Fool holds stakes in and endorses Apple, Bank of America, and Berkshire Hathaway. Additionally, The Motley Fool endorses Nu Holdings. They have a
disclosure policy
.
