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Legendary investor Warren Buffett has made another notable move in his Berkshire Hathaway portfolio, selling a significant portion of the company’s Bank of America holdings. The Oracle of Omaha is reallocating capital toward what he sees as a safer, high-yield investment: U.S. Treasury bills.
Buffett, who oversees approximately $600 billion in assets for Berkshire Hathaway, recently sold over $9.6 billion worth of Bank of America stock in the third quarter of 2024. He has also sold an additional $140 million in the first two days of October. This sale follows a trend of Buffett reducing his stock holdings, which includes the trimming of his position in Apple and other major investments over the past several quarters.
Why Sell Now? The reasoning behind Buffett’s decision to reduce these key positions comes down to a couple of factors. First, the current corporate tax rate is expected to rise after 2025, which would increase the tax burden on companies like Bank of America. Second, Buffett has likely determined that many of these stocks are trading at or above their intrinsic value, and selling now allows Berkshire Hathaway to maximize gains before tax rates change.
Despite scaling back on stocks, Buffett hasn’t been idle. Instead, he’s consistently moved Berkshire Hathaway’s cash into U.S. Treasury bills. As of Q2 2024, the company held $238.7 billion in Treasury bills, alongside $38.2 billion in cash. This represents a substantial increase from the $109 billion in cash and Treasury bills Berkshire held in Q3 2022.
Why Treasury Bills? Buffett has long favored U.S. Treasury bills due to their safety and liquidity. Treasury bills are short-term government bonds that mature within 12 months and are relatively insulated from interest rate fluctuations, making them a stable investment for Berkshire’s massive cash reserves.
With interest rates currently high, Treasury bills have become even more attractive, providing a higher yield than long-term bonds while maintaining minimal risk. Buffett has expressed his satisfaction with this safe, high-yield investment, even in times when Treasury bills offered lower yields.
“The reason for this shift is simple,” Buffett said. “There aren’t many better uses for our capital right now, especially when it comes to the big companies that Berkshire can invest in.”
A Caution for Small Investors While Buffett’s decision to park a large portion of Berkshire’s funds in Treasury bills makes sense for a company of its size, he has previously noted that smaller investors may still find better opportunities in the market.
“There are plenty of opportunities for investors with smaller portfolios,” Buffett said at Berkshire’s annual shareholder meeting earlier this year. “But for Berkshire, given the size of our holdings, Treasury bills are a good place to store cash as we wait for the right investments.”
Despite trimming positions in big-name companies, Berkshire Hathaway remains one of the most successful investment vehicles of all time. Investors worldwide continue to watch Buffett’s every move closely, taking cues from his long-term strategy and ability to navigate changing market conditions.
