By Jonathan Stempel

(Reuters) – Warren Buffett and Berkshire Hathaway (NYSE:BRKa) continued their retreat from stocks in the third quarter, significantly reducing their holdings in Apple and raising cash to a record $325.2 billion.

In its quarterly report on Saturday, Berkshire announced that it sold approximately 100 million or 25% of its Apple shares (NASDAQ:AAPL) during the summer, leaving them with around 300 million shares.

Berkshire has now sold over 600 million of Apple's shares in 2024, although Apple remains its largest stock holding at $69.9 billion.

Overall, Berkshire sold $36.1 billion in stocks, including several billion from Bank of America shares, while purchasing just $1.5 billion. This marked the eighth consecutive quarter where Berkshire was a net seller of stocks.

Additionally, Berkshire did not repurchase any of its own stock, the first occurrence since the second quarter of 2018, implying that Buffett may not see shares of his $975 billion conglomerate as a bargain.

Cathy Seifert, an analyst at CFRA Research in New York, stated that the buildup of cash could signal caution. "Berkshire is a microcosm of the broader economy," she noted. "Its hoarding cash suggests a 'risk-off' mindset, raising possible concerns among investors about the economy and markets."

Berkshire also reported a 6% decline in quarterly operating profit to $10.09 billion, falling short of analyst expectations. This decline stemmed largely from insurance underwriting losses, including the impact of Hurricane Helene, as well as currency losses due to a strengthening U.S. dollar.

Despite these challenges, improved profitability was seen at Geico, where accident claims decreased, and profitability also rose at BNSF railroad due to increased shipments of consumer goods, along with lower operating expenses at Berkshire Hathaway Energy.

Net income reached $26.25 billion, reflecting unrealized gains on stock investments, including Apple.

In May, Buffett expressed expectations that Apple would remain Berkshire's largest stock investment, explaining that selling some shares was logical as the 21% federal tax rate on anticipated gains could rise.

Buffett aims to invest every available penny in businesses providing advantages to Berkshire, while being prepared to act when other investors are facing difficulties, according to Tom Russo, a principal at Gardner Russo & Quinn, who has invested in Berkshire since 1982.

Operating profit across Berkshire's diverse businesses fell to $10.09 billion or about $7,019 per Class A share, down from $10.76 billion a year earlier. Analysts had predicted about $7,611 per share.

The insurance underwriting profit dropped 69%, impacted by losses from older policies, including $565 million related to Hurricane Helene, and a bankruptcy settlement concerning a defunct talc supplier. This decline overshadowed a 93% increase in Geico's underwriting profit.

Seifert expressed disappointment regarding weaker-than-expected claims trends in older insurance obligations, highlighting that many peers had already addressed similar issues, making Berkshire appear to lag behind.

Berkshire also estimated pre-tax losses between $1.3 billion and $1.5 billion for the fourth quarter due to Hurricane Milton, which hit Florida in October.

The $26.25 billion in net income, or $18,272 per Class A share, compared to a loss of $12.77 billion, or $8,824 per share, the previous year, when falling stock prices depreciated the value of Berkshire's investments.

Buffett has indicated that operating results are a more accurate reflection of Berkshire's performance, as accounting rules necessitate reporting unrealized investment gains and losses, adding volatility that Buffett advises investors to disregard.

Buffett, aged 94, has led Berkshire since 1965 and is anticipated to eventually pass leadership to Vice Chairman Greg Abel, aged 62.

The Omaha, Nebraska-based conglomerate encompasses businesses like Berkshire Hathaway Energy, several industrial and manufacturing firms, a significant real estate brokerage, and retail ventures, including Dairy Queen and Fruit of the Loom.

Berkshire's Class A shares have increased by 25% this year, compared to a 20% rise in the Standard & Poor's 500.