Is Warren Buffett Trying to Tell Us Something With Berkshire Hathaway?

Berkshire Hathaway (NYSE: BRK.A, BRK.B) is set to report its third-quarter earnings today, and it’ll be interesting to see how Wall Street responds. Because if you read the tea leaves, it doesn’t exactly look like he’s bullish on the future.

That is, if you’ve been tracking Berkshire Hathaway’s earnings this year, then you know Buffett has been banking cash and U.S. Treasury holdings, selling off huge stakes in blue-chip companies, and being rather frugal with its spending.

Berkshire’s cash position rose to a record $277 billion in the second quarter, up 47% from what was already a record $189 billion just three months earlier. That gave a nice bump to the firm’s investment income, which rose 36% in the first half.

However, it also meant parting ways with long-time stakes in Bank of America (NYSE: BAC) and Apple (NASDAQ: AAPL).

Buffett’s stake in BofA was more than a decade old, dating back to the financial crisis. Berkshire poured $5 billion into the stock, which at the time was down 90% from its peak to less than $6 per share.

Now he seems to be unwinding that position. In just the past few months, Berkshire sold a quarter of its stake in the bank, netting $10 billion.

On the one hand, that makes sense, given the current macro environment in which interest rates are falling. Conventionally, lower interest rates have a negative impact on banks’ earnings, as they lower the amount they earn on interest.

However, BofA delivered a strong third quarter, topping earnings on the back of higher investment banking and trading.

“Our customers’ deposit balances and asset quality are healthy, and we believe we have good opportunities to grow,” said BofA Chief Financial Officer Alastair Borthwick.

Now, Buffett still holds a sizable stake in BofA. This could just be profit-taking or a minor portfolio adjustment. And the share sales could ease as bank earnings prove resilient.

But in the broader context of the trend, it’s a bit of a red flag. And it’s not the only one.

Apple has been another casualty — and a surprising one, at that.

Just two years ago Buffett crowned Apple as one of Berkshire’s four major investment pillars alongside the firm’s insurance arm, utilities, and railroad — all of which it owns outright.

Even as recently as May, Buffett told Berkshire Hathaway shareholders that Apple is “an even better business” than longtime favorites American Express and Coca-Cola.

Yet Berkshire sold more than $80 billion of Apple stock in the first half of the year, parting ways with 505 million shares. Again, this is despite no obvious impetus other than caution, as Apple stock is up 25% year to date.

Buffett also has added some shares along the way, adding to Berkshire’s stakes in Occidental Petroleum and Sirius XM. But on the whole, the firm has sold more stock than it’s added this year.

Furthermore, the stock Buffett seems most interested in buying right now is his own. That is, Berkshire Hathaway

Over the past five and a half years, Berkshire has repurchased nearly $75 billion of its stock, including $9.2 billion in 2023.

Buffett has also suggested that he doesn’t see many viable value buys on the market right now, telling shareholders there are “essentially no candidates,” and that “things aren’t attractive.”

Far be it for me to speculate about Buffett’s ethos, but this suggests a rather grim outlook — or maybe battening down the hatches before next week’s election.

In any case, we could get more insight when Berkshire Hathaway reports its third-quarter earnings today.

This firm is expected to see a 3% drop in quarterly earnings, totaling $4.81 per share, though revenues is expected to climb almost 4% thanks to that increased investment income.

Berkshire Hathaway reported earnings of $30.3 billion in the second quarter, which was down from $35.9 billion in 2023. However, operating earnings rose by 15% in that period.