The Annual Letter of Warren Buffett Does Not Explain Why He Amasses More Cash and Sells More Stock

Warren Buffett’s cautious approach to investing has raised questions after Berkshire Hathaway revealed record cash reserves and continued stock sales, with no clear explanation from the legendary investor.

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The 94-year-old CEO increased Berkshire’s cash holdings to an unprecedented $334 billion while continuing to reduce the company’s equity positions during the latest quarter. However, Buffett did not address the reasons behind these moves in his much-anticipated 2024 annual letter to shareholders.

Despite trimming stock holdings, Buffett insisted that his long-standing preference for equities remains unchanged. "While some commentators view our cash position as extraordinary, the majority of your money remains in equities," he wrote. "That preference won’t change."

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Berkshire’s growing cash reserves have sparked speculation, particularly as interest rates are expected to decline from recent multi-year highs. Buffett has previously expressed dissatisfaction with high market valuations and limited attractive buying opportunities. This ongoing defensive stance has left some investors and analysts questioning why Buffett has not been more aggressive in pursuing investments.

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In his letter, Buffett reassured shareholders that Berkshire remains committed to equities. "Our shareholders can be confident that we will always allocate the majority of their capital to equities—primarily American companies, although many of these have significant international operations," he wrote. "Berkshire will never prefer cash-equivalent assets over owning quality businesses, whether we control them or hold a partial stake."

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However, the company’s financial report, also released Saturday, showed that Berkshire continued selling more stocks than it purchased for the ninth consecutive quarter. Throughout 2024, the conglomerate sold over $134 billion worth of equities, largely due to reductions in its two largest holdings—Apple and Bank of America.

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At the same time, Buffett has not shown interest in buying back Berkshire’s own stock. The company did not repurchase any shares in the fourth quarter of 2024 or during the first weeks of 2025, despite reporting a substantial increase in operating earnings.

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Buffett’s conservative stance stands in contrast to the broader market’s strong performance. The S&P 500 rose more than 20% in each of the past two years and continues to show gains this year. Berkshire’s stock has also performed well, rising 25% in 2023, 16% in 2024, and another 5% so far in 2025.

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Still, signs of uncertainty are emerging. Concerns about a slowing economy, market volatility caused by policy changes under President Donald Trump, and lofty stock valuations have begun to surface in recent weeks.

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Buffett hinted that these valuation concerns might be influencing his decisions. "We are neutral in our choice of equity investments, selecting based on where we can best deploy your (and my family’s) savings," he wrote. "Often, nothing looks compelling; only rarely do we find ourselves surrounded by attractive opportunities."

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Some analysts speculate that Buffett’s recent moves may not reflect a pessimistic market outlook but rather an effort to prepare Berkshire for his eventual successor, Greg Abel. By reducing large stock positions and accumulating cash, Buffett could be giving Abel greater flexibility for future investments.

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Buffett expressed confidence in Abel’s ability to identify opportunities, likening him to the late Charlie Munger. "Greg has clearly demonstrated his ability to act decisively when rare opportunities arise, just as Charlie did," Buffett wrote.

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At Berkshire’s 2023 annual meeting, Buffett surprised shareholders by announcing that Abel, who serves as vice-chairman overseeing non-insurance operations, would take over responsibility for all investment decisions, including managing the public stock portfolio.

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While Buffett has been cautious with most equity investments, he did signal one area where he intends to deploy capital—Japanese trading houses. Berkshire began acquiring stakes in these companies nearly six years ago, and Buffett suggested that the firm would continue to expand its holdings.

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"Over time, you will likely see Berkshire’s ownership of all five Japanese trading companies increase somewhat," he wrote.

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As Berkshire shareholders await more clarity, Buffett’s recent actions suggest a company preparing for both future opportunities and a smooth leadership transition. Whether his caution signals broader concerns about the market or a strategic shift remains an open question for investors.

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