Warren Buffett's Berkshire Hathaway (BRK., BRK.Q2 financial report to be released soon, cash reserves may exceed $200 billion

According to the Smart Finance app, Berkshire Hathaway (BRK.A.US, BRK.B.US) may see its cash reserves exceed $200 billion, surpassing the annual GDP of Hungary. This is because Buffett has unusually sold some of his favorite stocks.

The Omaha-based company is expected to announce on Saturday morning that its cash reserves have surpassed the record of $189 billion set in the first quarter when it releases its second-quarter earnings report. Buffett has been selling shares in Apple (AAPL.US) and Bank of America (BAC.US) ahead of Berkshire's earnings report, leading some to speculate that he is concerned about an overheated bull market.

Bill Stone, Chief Investment Officer of Glenview Trust and a Berkshire shareholder, stated earlier this week, "It does look like he is trying to reduce the risk in the portfolio, he is cutting the two biggest holdings, and nothing is more sensitive to the economy than banks. The market now seems very confident in a soft landing for the economy, maybe he is taking a contrarian view."

Berkshire has been a net seller of stocks for six consecutive quarters. Notably, Buffett reduced his stake in Apple by 13% in the first quarter after significant gains, citing tax reasons. With Apple's stock price rising 23% in the second quarter, he may continue to sell.

Surprisingly, the conglomerate has recently started selling its second-largest holding, shares of Bank of America. Over the past 12 trading days, Berkshire has sold $3.8 billion worth of Bank of America shares. These sales began in July and will not be reflected in the second-quarter report.

Due to the rise in U.S. bond yields over the past two years, Buffett's substantial cash reserves have been earning significant returns. However, with rates falling from multi-year highs, questions may arise again about his growing cash pile. Investing at around a 5% yield on three-month Treasury bills, $200 billion in cash would generate about $10 billion in annual income, or $2.5 billion per quarter, but these returns will decrease once the Fed starts cutting rates.

Analyst Andrew Kligerman of TD Cowen commented in an interview, "It's just a question of how long they intend to hold it. Buffett, who will turn 94 at the end of this month, admitted at Berkshire's annual meeting in May that he is willing to put more money into the stock market, but high prices have made him hesitant."

Buffett stated, "I think the reasonable assumption is that by the end of this quarter, cash will be around $200 billion. We would love to spend the money, but we won't unless we think the (business) risk is very low and we can make a lot of money."

Investors will also closely watch the quarterly performance of Berkshire's BNSF Railway and Berkshire Hathaway Energy (BHE), both of which have shown signs of weakness recently. BNSF is dealing with wage increases and declining revenue, while BHE faces pressure from damages related to wildfires Kligerman stated, "Non-insurance businesses will impact the company's performance, whether it is the sluggish railway business coupled with rising labor costs, or the utility business, both may achieve good results this quarter, but considering the liability risks, no one will be excited about it. On the contrary, Berkshire's insurance business is a bright spot, with first-quarter underwriting profit increasing by 185% year-on-year."

Kligerman gave Berkshire Hathaway a "hold" rating.

As of Thursday, Berkshire's stock has risen by over 21% this year, outperforming the S&P 500 index's 14% return. The company's market value has expanded to $956 billion, poised to join the trillion-dollar market value club