22 Mar

Warren Buffett’s Take on Berkshire Hathaway’s Cash

WRITTEN BY Mohit Oberoi, CFA

Berkshire Hathaway’s cash

Warren Buffet, Berkshire Hathaway’s (BRK-B) chairman, listed “a quartet of companies in which we share control with other parties” as Berkshire Hathaway’s third “grove.” The companies include Kraft Heinz (KHC), Pilot Flying J, Berkadia, and Electric Transmission Texas.

Warren Buffett’s Take on Berkshire Hathaway’s Cash

Buffett listed US Treasury securities and cash and cash equivalents as Berkshire Hathaway’s fourth grove. Berkshire Hathaway had $112 billion in US Treasuries and other cash equivalents at the end of the fourth quarter. The company also held $20 billion in “miscellaneous fixed-income instruments.”

Buffett

Buffett received some criticism for not deploying Berkshire Hathaway’s cash even though markets (SPY) fell in the fourth quarter. The company has been sitting on a $100 billion cash pile for quite some time. In his 2018 annual latter, Buffett said, “We consider a portion of that stash to be untouchable, having pledged to always hold at least $20 billion in cash equivalents to guard against external calamities. We have also promised to avoid any activities that could threaten our maintaining that buffer.”

Acquisition opportunity

Buffett also said, “In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own.” However, outright acquisition opportunities haven’t come easy for Berkshire Hathaway. Read Warren Buffett and the Problem with Elephants to learn more.

Buffett also said that Berkshire Hathaway might add to its portfolio of publicly traded securities this year. Berkshire Hathaway holds companies like Apple (AAPL), Goldman Sachs (GS), JPMorgan Chase (JPM), and Coca-Cola (KO) in its portfolio. In the fourth quarter, Berkshire Hathaway added Red Hat (RHT) and IBM (IBM) and exited Oracle (ORCL).

Next, we’ll discuss Buffett’s views on Berkshire Hathaway’s insurance operations.

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