Berkshire Hathaway reports $377 billion cash reserve, signaling caution to investors

Berkshire Hathaway disclosed a $377.4 billion cash balance in its third-quarter operating results, a level that the company’s leadership says underscores concerns about current market valuations. The conglomerate posted a $12.7 billion operating profit for the quarter and increased its share repurchases, but also reported that it sold $426 million more in equity securities than it bought, marking the 15th net-seller quarter in the past four years.

"The total value of U.S. stocks is well above its historic average, and finding a good deal is increasingly challenging," said the company's leadership, referencing the market-cap-to-GDP ratio often called the Buffett indicator.

The cash reserve, which includes cash, cash equivalents and U.S. Treasury bills, has grown despite Berkshire’s tradition of deploying capital through acquisitions and investments. Analysts note that the indicator, which averaged about 89 % of GDP historically, reached an all-time high of 236.42 % in August, suggesting that stock prices are significantly overvalued relative to the economy.

Since Warren Buffett’s retirement at the end of last year, Greg Abel has taken over day-to-day operations of the $359 billion investment portfolio. Both Buffett and Abel have maintained a disciplined approach to valuation, continuing a pattern of net equity sales that began under Buffett’s tenure.

Market observers caution that while the timing of a downturn cannot be predicted, history indicates that sustained premium valuations are difficult to maintain over the long term.