Berkshire Hathaway (BRK-B) was sitting on a massive cash pile at the end of the fourth quarter. The company’s cash pile increased in the quarter because its net buys were low. The company did take a small stake in Red Hat (IBM) and added to its positions in companies like J.P. Morgan (JPM). However, Berkshire Hathaway also trimmed its stake in Apple (AAPL) and exited Oracle (ORCL).
Berkshire Hathaway’s massive cash pile could be among the reasons behind the company’s recent underperformance. Since markets (SPY) (QQQ) have risen sharply this year, a large portion of Berkshire Hathaway’s cash is invested in Treasuries that aren’t yielding much.
Now, there are several ways that Berkshire Hathaway can utilize its cash. The company could add to its portfolio of publicly traded securities. Berkshire Hathaway could acquire another company—something that Warren Buffett talked about in this year’s shareholder letter. Berkshire Hathaway could also look at a dividend or a special dividend but the probability looks low given Buffett’s previous comments on dividends. Finally, Berkshire Hathaway could look at massive buybacks. In a recent interview with Financial Times, Buffet talked about a $100 billion buyback. Read Warren Buffett on $100 Billion Buyback and His ‘Nightmare’ for more analysis.
Buffett might have to face questions about Berkshire Hathaway’s cash pile during this year’s annual meeting. Buffett might also offer some cues on who would run the company after his eventual retirement. He might also provide insights into the company’s recent announcement about pumping $10 billion in Occidental Petroleum.