In an interview with CNBC, Warren Buffett, Berkshire Hathaway’s (BRK-B) chairman, was asked if he sees a recession coming—especially since the yield curve briefly inverted last week. Buffett said, “I just hope I see a lot of recessions.” Some of Berkshire Hathaway’s best investments have come during periods of economic turmoil. Berkshire Hathaway brought stakes in General Electric (GE) and Goldman Sachs (GS) during the 2007–2008 economic meltdown.
Massive cash pile
Berkshire Hathaway is sitting on more than $100 billion in cash, according to the most recent filing. Buffett surprised markets by not buying stocks aggressively in the fourth quarter. Berkshire Hathaway trimmed its stake in Apple (AAPL) and exited Oracle (ORCL). However, Berkshire Hathaway did add Red Hat (RHT) (IBM) to its portfolio.
In his 2018 annual letter, Buffett said that he and vice chairman Charlie Munger “hope for an elephant-sized acquisition.” However, Buffett admitted that acquisitions aren’t cheap. A sharp economic slowdown could provide Buffett with acquisition opportunities at reasonable prices. He might also consider some stocks like Apple if prices fall.
Recently, Buffett said in an interview that Berkshire Hathaway was considering an acquisition in the fourth quarter. However, the deal didn’t go through. Known for his value investments, Buffett has been waiting for a big acquisition since Berkshire Hathaway acquired Precision Castparts in 2016. The company supplies components to aircraft manufacturers like Boeing (BA).
Buffett, who held bearish views on the airline sector, was rumored to be acquiring Southwest Airlines (LUV). To learn more, read How Warren Buffett’s Investment Philosophy Has Evolved.