Tonight's Buffett shareholder letter! In addition to the record cash reserve, there are also three things that are receiving a lot of attention.

At 9:00 tonight, as "Stock God" Warren Buffett releases his annual shareholder letter, investors are eagerly anticipating it, hoping to gain insights into the stock market. Buffett's long-held investment philosophy is "only act when the risk is low and the returns are substantial." Faced with the current high valuation of the stock market, Buffett has chosen to be cautious and observant. According to CFRA analyst Cathy Seifert's prediction, Berkshire's cash reserves may have reached a historic high of around $320 billion. James Shanahan, senior stock research analyst at Edward Jones, said that many financial advisors are worried: "If Warren Buffett isn't buying stocks, why should we?" Additionally, investors are feeling uncertain due to factors such as trade conflicts, US fiscal policy, and political turmoil at GEO Group Inc. Turning 95 this August, Buffett may comment on adjustments to his stock portfolio, succession plans, and the macroeconomic situation, becoming a focal point of market attention. So far this year, Berkshire Hathaway's Class A and Class B shares have risen by about 6.4% and 6.13% respectively, far exceeding the S&P 500 index's 2.5% increase. Buffett's annual letter will undoubtedly provide investors with important market guidance and investment wisdom, worth waiting for. Record cash reserves: Opportunity or hidden concern? According to CFRA analyst Cathy Seifert's prediction, Berkshire's cash reserves may have reached a historic high of around $320 billion. This figure has significantly increased from $300 billion at the end of the third quarter of 2024, reaching the highest proportion of company assets since 1998, causing speculation in the market about Buffett's investment strategy. Buffett stated at the May 2024 shareholder meeting that the company does not invest just for the sake of investing but only "pitches we like." Long-time observers of Berkshire believe that Buffett is "hoarding" cash mainly because current market valuations are too high. A report in The Wall Street Journal on the 21st pointed out that the current price-to-earnings ratio of the S&P 500 index is 22.3 times, higher than the 10-year average of 18.6 times. In the areas where Buffett excels, high-quality large companies are hard to find at "bargain prices," making it difficult for Buffett to find targets that meet his investment criteria. Another reason for the increase in cash reserves is the reduction of Apple Inc. (AAPL.US) stock. According to FactSet data, starting from the end of 2023, Berkshire has reduced its holdings in Apple Inc. for four consecutive quarters, with its stake dropping from nearly 6% to 2%. Nevertheless, as of the end of 2024, Apple Inc. remains Berkshire's largest stock holding, with a market value of $75 billion. In addition to reducing stock holdings, Berkshire has also suspended stock buybacks. In the third quarter of 2024, Berkshire halted share buybacks for the first time. This is related to the continuous rise in Berkshire's stock price, with its market value exceeding $1 trillion for the first time in 2024. In the current high stock price environment, buying back shares is no longer a wise move. Despite the controversy surrounding the large cash pile, long-time observers believe this reflects Buffett's strategic layout: Preparing for potential large acquisitions: Based on the third-quarter report, Berkshire has the ability to acquire almost any large company in the US. Consideration for a smooth transition: At 94 years old, Buffett may be creating a good starting point for his potential successor Greg Abel. Earning substantial interest income: In just the first nine months of 2024, the company earned nearly $12 billion in income from cash and investments. Furthermore, long-term shareholders do not seem to be anxious. They trust Buffett's decisions and hope that Berkshire can seize the next "elephant-sized" investment opportunity. Darren Pollock, portfolio manager at Cheviot Value Management, stated: "We hold Berkshire stock in hopes of seeing the capital reinvested. We look forward to the occurrence of 'big whales' that can be caught and reaped. Clearly, this takes a long time." Three more things to watch In addition to the record cash reserves, there are three more things worth watching. First, the adjustment of Buffett's stock portfolio. As of December 31, 2024, Berkshire's stock portfolio was valued at approximately $267 billion. In the fourth quarter, the company net sold about $6 billion in stocks, the most notable being the reduction in bank stocks. At the same time, the company increased holdings of about $1 billion in Constellation Brands Inc. stocks. Second, with Buffett turning 95 this August, the issue of succession is once again in focus. Although Greg Abel has been identified as the vice-chairman of non-insurance operations and Buffett's potential successor, investors hope to gain a deeper understanding of the overall management team composition at Berkshire. It is worth noting that Ajit Jain, responsible for insurance operations, is rumored to retire in the coming years. This change may provoke thinking in the market about the long-term stability of the company's management. Additionally, amid factors such as trade wars, US fiscal policy, and political turmoil at GEO Group Inc, investors are feeling uncertain. Although Buffett's annual letter usually focuses on company performance and investment philosophy, in special times (such as after the 9/11 terrorist attacks and during the 2007-2009 financial crisis), he has also expressed views on macroeconomic events. Considering the potential impact of the current macro environment on Berkshire's business outlook, Buffett may comment on this in this year's letter, providing valuable insights for investors. This article is reprinted from "Wall Street News", author: Zhang Yaqi; GMTEight editor: Jiang Yuanhua.