"New King" Ascends with "Three Fires": Berkshire Hathaway Starts "Spending," Net Stock Purchases Reach $20 Billion

Since Greg Abel took the helm at Berkshire Hathaway, he has displayed a capital allocation style markedly different from his predecessor's—the cash-rich giant, sitting on over $360 billion in cash, is accelerating its deployment of capital.

In the second quarter, Berkshire made net stock purchases of approximately $20 billion, ending the net selling trend maintained by former CEO Warren Buffett for over three years.

Meanwhile, the company spent about $4.5 billion repurchasing its own shares and acquired homebuilder Taylor Morrison Home for $6.8 billion. Cash reserves decreased by approximately 4% quarter-on-quarter to $364.7 billion, marking the first such decline in four years. The company's net profit for the quarter more than doubled year-on-year to $25.7 billion.

These moves come against the backdrop of U.S. stock markets at historical highs, forming a sharp contrast to the cautious stance of the Buffett era, prompting the market to reassess the signaling value of Berkshire's investments. At the shareholder meeting in May, Abel stated his willingness to take "decisive action" and make "significant investments." This flurry of activity in the second quarter represents the fulfillment of that commitment.

Net Purchases Near $20 Billion, Reversing Three-Year Selling Trend

Berkshire purchased $23.5 billion worth of stocks and sold $3.7 billion in the second quarter, resulting in net purchases of approximately $19.8 billion. This marks the first time in over three years that the company has been a net buyer of stocks. The volume of sales was also the lowest since 2022.

The most notable move was the $10 billion investment in Alphabet, the parent company of Google.

Just days after Abel participated in leading an $85 billion financing deal for Alphabet, Berkshire announced the purchase of Alphabet's common stock, placing it among the company's top five holdings alongside American Express, Apple, Bank of America, and Coca-Cola.

Regulatory filings show that Berkshire invested a net amount of approximately $21 billion in the "Business, Industrial, and Other" category during the second quarter, with Alphabet falling under this classification. Investors will gain a more complete picture of portfolio changes when Berkshire submits its quarterly holdings report to U.S. securities regulators later this month.

Acquisition of Taylor Morrison Home Expands Industrial Footprint

In addition to stock investments, Berkshire announced the acquisition of homebuilder Taylor Morrison Home at an enterprise value of $8.5 billion (transaction price of approximately $6.8 billion), making it one of the largest M&A transactions for the company in recent years.

This acquisition, along with the investment in Alphabet, signals that Abel is putting his own stamp on the company, which was led by Buffett for over sixty years. Abel began his career in accounting and rose to the core management team through Berkshire's energy business, officially succeeding Buffett as CEO earlier this year.

Macrae Sykes, a portfolio manager at Gabelli Funds, stated that Berkshire's share buybacks indicate that "the best capital allocators believe the company's stock currently offers value."

Steady Growth in Operating Profit, Insurance Business Drags Overall Performance

Operating profit excluding investment gains and losses—Berkshire's preferred metric for measuring the performance of its underlying businesses—increased by approximately 16% year-on-year to about $13 billion, indicating that core operations remain robust.

Profits in the Manufacturing, Service, and Retailing segment jumped 24% to $44.7 billion, with strong performances from businesses such as industrial metal components, Duracell batteries, and Flying J travel centers.

BNSF Railway's revenue grew 15% year-on-year, benefiting from increased import volumes on the U.S. West Coast and freight shifts due to trucking capacity shortages. Sales at TTI, the electronic components distribution subsidiary, surged by more than 26%, driven by heightened demand from the AI infrastructure investment boom.

However, the insurance business acted as a drag on performance.

Operating profit from the core insurance business declined 13% year-on-year to approximately $1.7 billion, primarily due to higher claim payouts at auto insurer Geico and increased advertising spending.

Reinsurance premiums rose 4.1% year-on-year, partly thanks to a deal struck this year by Vice Chairman Ajit Jain, in which Berkshire acquired a 2.5% stake in Japanese insurer Tokio Marine in exchange for a share of business profits. The company noted that reinsurance premiums would have declined if the impact of this transaction were excluded.

Cash Reserves Still Exceed $360 Billion; The Challenge of "Spending" Is Far From Over

Although cash reserves saw their first quarter-on-quarter decline in four years during the second quarter, the $364.7 billion balance remains substantial, and how to deploy it effectively remains a core challenge for Abel.

Some Berkshire observers remain patient.

Paul Lountzis, President of Lountzis Asset Management, said, "In such an exuberant market environment, it is difficult to expect Greg to rush into large-scale M&A. Valuations in the private market are already crazy, and public markets are somewhat irrational."

Berkshire Hathaway Class A shares closed at $780,086 on Friday, up 3.4% year-to-date. However, this is still about 3.6% below the historical high of $809,350 reached around early May 2025, when Buffett announced his retirement. During the same period, the total return of the S&P 500 Index was approximately 14%.