A $150 Billion Question: What Will Warren Buffett Do With All That Cash?

February 22, 2024

By Karen Langley

The mountain of cash at Warren Buffett’s Berkshire Hathaway just keeps growing.

Berkshire’s tally of cash and equivalents has marched skyward for five consecutive quarters, reaching a record $157.2 billion at the end of September. Whether it finished 2023 at new heights is one question investors will look to answer when the Omaha, Neb., company releases its annual report Saturday.

Followers will parse Buffett’s accompanying letter for any plans the famed investor might have for that money as well as his thoughts on the economy and markets. Many are also eager to read any reflections Buffett might share on the life and contributions of Charlie Munger, his longtime partner and friend who died Nov. 28.

Investors got their most recent look at Berkshire’s stock-market moves when the company disclosed it had trimmed its flagship position in Apple in the fourth quarter while boosting its stakes in Chevron and Occidental Petroleum.

Meanwhile, the tower of cash leaves Buffett equipped to pounce should he spot an attractive business to add to the Berkshire empire, which includes insurer Geico, BNSF Railway and Dairy Queen. The cash also helps maintain what Buffett described in a February 2009 letter to shareholders as Berkshire’s “Gibraltar-like financial position.”

Berkshire had more than $125 billion in short-term investments in U.S. Treasury bills on Sept. 30. Yields on such short-term government debt rocketed higher as the Federal Reserve raised interest rates in a bid to tame inflation. The yield on six-month Treasury bills, for example, was 5.33% this week, up from 0.64% in February 2022, according to Tradeweb ICE closes.

Berkshire’s insurance operations had $4.2 billion in interest and other investment income in the first nine months of 2023, up from about $790 million in the same period in 2022. The increase was primarily because of a rise in short-term interest rates, the company said in its third-quarter report.

Still, Buffett admitted greater ambitions when asked at last year’s annual meeting about prospects for the cash.

“What we’d really like to do is buy great businesses,” he said. “If we could buy a company for $50 billion or $75 billion, $100 billion, we could do it.”

“It would be easier to do with a private company,” he said. “And there aren’t very many that are big. On the other hand, there’s nobody else that can quite make a deal like we can, under the right circumstances.

In the first nine months of 2023, Berkshire was a net seller of stocks, according to the company’s most recent quarterly report. One stock the company did like: its own. Berkshire used about $7 billion to repurchase shares in the first three quarters of last year.Charlie Munger, Warren Buffett’s longtime partner and friend, died in November. Photo: Michael Lewis for The Wall Street Journal

Buffett has often written about the importance of Berkshire’s financial strength. In a February 2022 letter to shareholders, he wrote that he and Munger had pledged that Berkshire, along with its subsidiaries other than BNSF and Berkshire Hathaway Energy, would always hold more than $30 billion in cash and equivalents.

Some observers note that the company needs substantial cash for more than investing. Berkshire’s insurance operations include business that carries the risk of big losses.

Ajit Jain, who heads Berkshire’s insurance operations, said at the annual meeting in May that a hurricane in Florida could lead to a loss of as much as $15 billion. No loss, by contrast, would mean several billion dollars in profit, he said.

“If it wasn’t for the insurance business, they wouldn’t need to hold such a huge amount of cash,” said Darren Pollock, portfolio manager at Cheviot Value Management in Beverly Hills, Calif. “They need to be prepared for those catastrophic events. That’s a big reason why many of those billions of dollars are sitting there.”

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