Warren Buffett reveals tax milestone, addresses $334B cash stockpile

Berkshire Hathaway – which last year became the first US company outside of the tech sector to surpass $1 trillion in market value - revealed its latest results after the bell Friday.

Operating earnings surged 71% in the fourth quarter to $14.5 billion, helped by interest rates boosting investment income and providing a 48% rise in income for its insurance business.

In his annual letter to shareholders, Warren Buffett admitted to the mistakes and errors he has made along the seven decades that he has controlled the company and noted that “it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters.”

For now, at 94, Buffett continues at the helm of the conglomerate and remains a thought leader in entrepreneurship and investing.

The letter continues with a candid note that 57% of Berkshire’s 189 operating companies reported a decline in revenues, but that Treasury Bill yields improved and “we substantially increased our holdings of these highly liquid short-term securities.”

Buffett also highlights the tax that his company paid to the IRS in 2024 totaled $26.8 billion, more than any other business ever and accounting for 5% of all taxes paid by corporate America last year.

“If Berkshire had sent the Treasury a $1 million check every 20 minutes throughout all of 2024 – visualize 366 days and nights because 2024 was a leap year – we still would have owed the federal government a significant sum at yearend,” he wrote.

While the tax paid was eyewatering, the letter also reveals that over the 60 years since Buffett took control, the company has paid a total of $101 billion in cash income tax. And that’s just to the US Treasury – oversees taxes add to that!

CASH STOCKPILE

Buffett’s letter also addresses the company’s huge cash stockpile of around $334 billion by the end of 2024, more than double where it was a year earlier. With stock valuations having made acquisitions less attractive, he reiterated the company’s position on investing.

“Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities – mostly American equities although many of these will have international operations of significance. Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned,” he wrote in the letter.  

HOW NOT TO INVEST

Before investors rush to buy into the conglomerate, they should take note of some of the takeaways from one of Buffett’s previous letters to shareholders which sounded some cautious notes on the wrong ways to invest in the business.

In the 2014 letter, Buffett warns investors who might be tempted to jump into Berkshire Hathaway stock when the price is unusually high: “say, approaching double book value, which Berkshire shares have occasionally reached,” he wrote. This approach could mean a long wait of many years before the investor can realize a profit.

“In other words, a sound investment can morph into a rash speculation if it is bought at an elevated price,” Buffett added, sharing a nugget of the veteran investor’s experience that transcends his own firm’s stock.

Buffett continued, noting that Berkshire stock bought at “a price modestly above the level at which the company would repurchase its shares” should produce gains within a “reasonable” time period, adding that there are no guarantees for investors that intend to sell within a year or two, whatever the entry price.

“I recommend that you purchase Berkshire shares only if you expect to hold them for at least five years. Those who seek short-term profits should look elsewhere,” he said, although stressing that he believed a permanent capital loss in Berkshire stock is “is as low as can be found among single-company investments.”

Buffett also said that Berkshire stock should not be bought with borrowed money, noting that there had been three times in the past 60 years where the company’s stock had fallen to less than 50% from its high point. The billionaire stated that while Berkshire holdings should be satisfactory for investors, it could be disastrous for leveraged speculators.