Berkshire Hathaway operating profit rises, cash sets record By Reuters

Berkshire Hathaway’s Q1 operating profit rose 18% to $11.35 billion, while net income more than doubled to $10.1 billion, supported by gains across insurance and other major businesses. The company also repurchased $234 million of stock, its first buybacks since May 2024, even as cash climbed to a record $397.4 billion and it remained a net seller of stocks by $8.1 billion. The quarter was the first under CEO Greg Abel, with Berkshire’s shares still lagging the S&P 500.

Analysis

BRK.B is in a classic late-cycle capital-allocation paradox: the business engine is still compounding, but the real signal is the size and persistence of idle liquidity. A nearly $400B cash position is not just optionality; it is a drag on return on equity unless management can convert it into either (i) a large, accretive acquisition or (ii) sustained repurchases at a meaningful discount to intrinsic value. The small buyback print suggests the floor is still there, but the pace implies management is comfortable letting cash build until volatility forces better entry points.

The second-order winner is OXY, but mainly as a capital-markets beneficiary rather than an operational story. Berkshire’s prior purchase of the chemicals unit likely improves OXY’s balance-sheet flexibility, yet the more important dynamic is that Berkshire remains a potential backstop buyer of the stock or future assets if energy valuations compress. That optionality can suppress OXY downside in risk-off tapes, but it also means the market may keep awarding a scarcity premium to assets Berkshire could still absorb.

AAPL remains the subtle loser because Berkshire’s net selling reinforces the view that the large-cap tech trade is no longer a core capital-allocation priority for one of the market’s most visible value sponsors. The forced-owner overhang matters: even if the underlying franchise is intact, persistent divestment from a high-profile holder can cap sentiment and create supply during strength. This is more relevant over months than days, and the main reversal catalyst would be a visible re-acceleration in buybacks or a marked shift in Berkshire’s disclosure of equity purchases.

The market’s consensus may be over-indexing on the headline earnings beat and underpricing governance transition risk. Greg Abel inherits a balance sheet with enormous dry powder but no clear playbook for deployment, which keeps Berkshire’s multiple hostage to proof of capital allocation rather than operating momentum. The cleanest setup is to own BRK.B as a defensive compounder only if the stock cheapens relative to cash-adjusted intrinsic value; otherwise, the opportunity cost versus direct capital-return names is high.

Key Decisions for Investors

• Short-term: sell upside calls against BRK.B into post-earnings strength; the cash hoard reduces downside, but lack of deployment reduces immediate multiple expansion. Best risk/reward if implied vol stays elevated through the annual meeting.
• Long OXY vs short XLE basket for 1-3 months: Berkshire’s implied sponsorship creates asymmetric support for OXY-specific assets, while the broader energy complex lacks that idiosyncratic bid.
• Reduce tactical AAPL exposure on rallies over the next several weeks; Berkshire’s continued selling is a supply overhang and can mute momentum even if fundamentals stay solid.
• Place a limit bid for BRK.B on 5-8% pullbacks versus market; that is the zone where cash-backed optionality and repurchase support should improve downside asymmetry.
• If management signals a willingness to deploy >$25B into M&A or buybacks, flip to a long BRK.B / short S&P pair for 6-12 months, as capital deployment would be the clearest catalyst for multiple re-rating.