Warren Buffett has been selling stocks including Chevron and hoarding a record level of cash

Published Mon, Nov 6 202312:27 PM ESTUpdated Mon, Nov 6 20232:54 PM EST

Warren Buffett played defense in the third quarter as Berkshire Hathaway 's cash pile hit new heights and the "Oracle of Omaha" sold billions of dollars worth of equities. The Omaha, Nebraska-based conglomerate's operating earnings registered a 40.6% year-over-year jump last quarter , bolstered by its strong insurance businesses. Thanks to a surge in bond yields, Berkshire's cash, which was mainly parked in short-term Treasury bills, grew to a record level of $157.2 billion. "Berkshire expanded the cash hoard on its Fort Knox balance sheet, allowing the unique ability to take advantage of investment opportunities in any downturn while virtually eliminating the risk of ruin," said Bill Stone, chief investment officer at Glenview Trust and a Berkshire shareholder. Berkshire has been putting its massive cash chest into good use, buying up short-term Treasury bills yielding at least 5%. The conglomerate owned $126.4 billion worth of such investments at the end of the third quarter, compared with about $93 billion at the end of last year. These lucrative government bond investments in turn boosted Berkshire's insurance empire, via so-called float. Insurers invest the float, accumulated from insurance premiums collected, in a variety of assets before insurance losses are reimbursed. "These temporary cash holdings … have allowed Berkshire to generate additional returns as the company invests these funds in assets that are commensurate with the duration of the business being underwritten," said Greggory Warren, Berkshire analyst at Morningstar. "They have tended to come at little to no cost to Berkshire, given the company's proclivity for generating underwriting gains the past several decades." Berkshire's insurance businesses saw a profit of $2.42 billion last quarter, compared with a loss in the prior-year period. The strength helped offset the earnings weakness in other business units, including railroad BNSF. Net seller of stocks Berkshire was a net seller of publicly traded stocks in the third quarter, buying $1.7 billion worth of equities while selling nearly $7 billion. One notable move was that the conglomerate sold about $2 billion worth of Chevron shares. However, the energy stock was still among Berkshire's top five holdings, worth $18.6 billion at the end of September. Chevron gained more than 7% during the third quarter amid a jump in oil prices. Meanwhile, Berkshire's buyback activity continued to slow down as shares roared to a record high during the quarter. The firm spent $1.1 billion to repurchase shares, bringing the nine-month total to approximately $7 billion. Berkshire Class A shares have rallied nearly 12% this year. After reaching an all-time high on Sept. 19, shares have since fallen about 7% from the peak. The repurchase amount was lower than UBS' expectation of $2.3 billion for the quarter. UBS analyst Brian Meredith said Berkshire shares are currently trading at around a 12% discount to their intrinsic value, which is below the 18% average discount since the conglomerate resumed share repurchases in 2018. "We continue to believe BRK's shares are an attractive stock in an uncertain macro environment," Meredith said.