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What will Berkshire Hathaway do with its cash pile?

The fact it is not spending big is being seen as a bearish sign

Berkshire-themed stickers on the exhibition floor during the Berkshire Hathaway annual shareholders meeting in Omaha. Photographer: Dan Brouillette/Bloomberg

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Proinsias O'Mahony
Tue May 14 2024 - 06:00

Berkshire Hathaway’s cash pile is likely to reach $200 billion this quarter.

If Warren Buffett can’t find investment opportunities, does that suggest stocks are overvalued?

The announcement that Berkshire’s cash pile now stands at $189 billion generated many ominous-sounding headlines. It also prompted one money manager, value investor Bill Smead, to say Buffett was “as bearish as he ever gets”.

That’s hyperbolic. Stocktake has cautioned against such assumptions in the past, pointing out that as Berkshire’s portfolio grows over time, so too will its cash holdings. Record cash holdings are perfectly normal.

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Still, Berkshire’s cash mountain is noteworthy on this occasion.

Berkshire spent $2.7 billion on stocks in the first quarter of 2024 and sold almost $20 billion. Cash holdings have increased 20 per cent over the past six months, from $157 billion in September to $189 billion, and by about 70 per cent since 2022.

It has been especially busy in trimming its biggest shareholding, Apple, selling about 13 per cent of its position over the last quarter. This doesn’t mean Buffett is bearish on Apple (it remains Berkshire’s biggest position, and Buffett says this won’t change “unless something dramatic happens”) or on the overall market (reasons for selling include higher interest rates on cash and potential tax increases).

Still, rising prices and bull markets can be tricky for opportunistic investors such as Buffett. “We only swing at pitches we like,” says Buffett. “Today things aren’t attractive”.

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