Berkshire's Cash Flow Statement

From the 2024 Annual Report,

Before we go into the Grove discussion, let's look at the Cash Flow Statement as a Forest.

The cash flow statement answers one simple question:

Where did the cash actually come from, and where did it go?

It tells us a story. In Berkshire’s case, it's a story of how capital is being allocated across the five groves.

From the Forest-level:

• Cash from operating activities: ~$30.6B

• Cash used in investing activities: ~($10.3B)

• Cash used in financing activities: ~($10.4B)

At first glance, that looks underwhelming relative to $89B of GAAP net income.

That gap is why Buffett tells us not to value Berkshire off reported earnings. Cash flow strips out equity mark-to-market noise and shows you what actually changed economically.

Let's go by Grove:

Grove 1: Controlled non-insurance businesses (cash engines with heavy reinvestment)

This grove shows up primarily in operating cash flow and capex.

Berkshire’s operating businesses generate enormous cash, but they are also capital-intensive:

• Railroads, utilities, and energy systems require constant reinvestment

• Capex in 2024 was roughly $19B.

My take:

• These businesses are not optimized for “free cash flow margins”

• They are optimized for durability, scale, and long-term earning power

Grove 1 throws off real cash, but it demands real reinvestment. That’s the price of owning irreplaceable infrastructure.

Grove 2: Public equities

The cash flow statement is where you see what Berkshire actually did in equities.

In 2024:

• Equity purchases: ~$9B

• Equity sales: ~$143B

That’s ~$134B of net equity selling.

This is one of the most important takeaways from the entire statement... I'm honestly surprised, but then again, at this time Berkshire was offloading a lot of its Apple stock.

It tells us:

• Berkshire was not finding enough opportunities at prices it liked

• Capital was intentionally pulled out of Grove 2

• And redeployed primarily into Grove 4 (cash and T-bills)

Grove 3: Equity-method holdings

Grove 3 doesn’t move the consolidated cash flow statement much.

That’s not because it’s unimportant. It’s because:

• Equity-method earnings are largely non-cash

• Distributions are irregular

• And value compounds internally at the investee level

Buffett would never judge these holdings by near-term cash flow. He judges them by look-through earnings and long-term economics. This is the least important of the moats.

Grove 4: Cash and Treasury Bills

The largest numbers on the investing section are not acquisitions. They’re Treasury bills.

In 2024:

• Berkshire purchased hundreds of billions of U.S. Treasury Bills

• And rolled or redeemed hundreds of billions as they matured

This is not trading. It’s industrial-scale liquidity management.

Buffett doesn’t “hold cash.”

He runs a massive, constantly rolling T-bill ladder that:

• stays liquid

• earns real yield

• preserves optionality - its the elephant

We can see the strength of their earnings/cash flows in Grove 4. Buffett purchased $526B (!!) in T-bills/bonds in 2024. Holy cow.

Grove 5: Insurance (float shows up as quiet cash dynamics)

Insurance doesn’t scream at us on the cash flow statement.

Float doesn’t appear as a single line. Instead, it shows up through:

• Changes in unpaid losses and loss adjustment expenses

• Changes in unearned premiums

• Retroactive reinsurance balances

In 2024, those items continued to support Berkshire’s investable capital base.

This is classic Buffett:

• Insurance cash flows often look like “working capital noise”

• In reality, they represent the funding engine that allows Berkshire to invest far more capital than shareholders alone provide

Insurance is not just a business. It’s the financing system for the rest of the forest.

Buffett said this on pg 10 in the Annual report:

Grove 4 is quietly producing real investable capital, even before the cash hits the account.

My takeaway

The 2024 cash flow statement tells a clear story:

• Grove 1 continues to generate durable operating cash, with heavy reinvestment (only downside- but also these moats are wide)

• Grove 5 continues to finance the system through float

• Grove 2 was deliberately shrunk

• Grove 4 absorbed massive capital, strengthening the fortress

• Grove 3 compounds quietly in the background

This is not a company maximizing short-term cash flow.

This is a company optimizing for flexibility and long-term compounding.

Sentiment: Very bullish