In the storm of artificial intelligence, investors are turning to Berkshire Hathaway for protection against risks. Previously, since Warren Buffett announced his retirement as CEO last year, the stock price of this conglomerate has lagged behind the broader market.
Berkshire Class B shares have risen by 13.6% so far this year, outperforming the S&P 500 index by 7.8%. This performance is particularly notable as Wall Street has withdrawn from technology stocks that were once on the rise, driven by the AI craze. Since October 1st alone, Berkshire's stock price has soared by 14%, while the S&P 500 index has fallen by about 4%.
This is similar to other years that have experienced significant market turmoil. The most recent instance was in 2022, when the Federal Reserve initiated a aggressive interest rate hike cycle, causing the broader market index to fall by 18%, while Berkshire Hathaway rose by 4% that year.
However, Berkshire Hathaway's highly watched investment portfolio was not immune to the recent market fluctuations. According to the company's third-quarter financial report submitted on Saturday, investment returns plummeted by 46% compared to the same period last year, to $9.4 billion.
Berkshire's largest stock holdings during the quarter remained Alphabet, American Express, Apple, Bank of America, and Coca-Cola.
Although more detailed documents to be released later this month will disclose the specific operations, the quarterly financial report shows that Berkshire bought $2.4 billion in stocks and sold about $2.8 billion during that quarter.
Calculated by cost, the company increased its holdings in stocks in the "Commercial, Industrial, and Other" category by $2.3 billion, while reducing its holdings in stocks in the "Banking, Insurance, and Finance" category by $400 million.
Meanwhile, Greg Abel, who took over as CEO from Buffett at the beginning of this year, continues to utilize Berkshire Hathaway's substantial cash reserves and has accelerated stock repurchases.
In the third quarter, the company repurchased $9.6 billion of its own shares, more than doubling the pace of repurchases from the second quarter. In the four weeks leading up to the fourth quarter, Berkshire Hathaway repurchased another approximately $2 billion in shares.
Berkshire Hathaway's business scope is extensive, but the company still focuses on traditional businesses such as railways, BNSF, Brooks running shoes, See's candies, and Forest River RVs.
In July, Abel further continued this strategy by agreeing to acquire the housing builder Taylor Morrison for $6.8 billion. This move broke a long period without any major mergers and acquisitions; during that time, Buffett had been complaining about not being able to find suitable and inexpensive assets.
Berkshire's investments in traditional economic sectors have already paid off. In the third quarter, its railway, energy, and manufacturing businesses recorded strong profits, however, its insurance underwriting business saw a significant decline.
At the same time, the AI craze has not only driven the technology sector but also industries that have benefited from billions of dollars in data center construction and power grid upgrade expenditures.
As a result, the U.S. gross domestic product (GDP) continued to grow strongly, with an annualized growth rate of 3.4% in the third quarter, which is higher than the 2.2% in the second quarter.
However, in the gubernatorial elections in data center hotspots such as Texas, Ohio, and Georgia, Democrats swept the boards, which is seen as slowing down the construction pace of AI and dragging down the overall economy.
