Warren Buffett’s Berkshire Hathaway has a record $157 billion pile of cash or cash equivalents, despite the company’s quarterly loss widening due to a market downturn.
Berkshire revealed this in the company’s results for the third quarter of 2023.
This is up from $147.4 billion in cash at the end of the second quarter and surpasses the previous record of $149.2 billion that was set two years ago.
Most of Berkshire’s cash is held in short-term US Treasury bonds, and due to the rise in interest rates, the income from this cash pile rose by $1.3 billion versus a year earlier.
The enormous cash pile leaves Buffett well-equipped to pounce on any attractive opportunities to buy a business.
Charlie Munger, Berkshire’s vice chairman and Buffett’s longtime business partner, told the Wall Street Journal in a recent interview that the odds of another big acquisition under the pair were “at least 50/50.”
The company posted a net loss of $12.8 billion for the third quarter, compared to a loss of $2.8 billion a year earlier.
This was due to the rise in investment losses to $23.5 billion due to a sharp market downturn in the quarter. The S&P 500 dropped 3.6% in the three months through September.
However, Berkshire’s operating earnings rose to $10.8 billion as the company’s insurance businesses continued to perform well.
Buffett has said operating earnings are the better gauge of the company’s performance.
Accounting rules require Berkshire to include unrealised gains and losses from its investment portfolio when it reports net income, so a slide in the stock market will weigh on its results even if Berkshire’s underlying businesses are performing well.
Cash is king
Buffett said earlier this year that he is comfortable holding this much cash because he believes the stock market is overvalued and few good investment opportunities are available.
However, he has also said he is ready to deploy this cash as soon as he finds a good investment.
In his 2023 letter to shareholders, Buffett said that Berkshire was “prepared to do big deals” if the right opportunities came along.
He also said he was “not worried” about the company’s large cash hoard, saying it was “a source of strength”.
Buffett’s position on cash is not without its critics. Some people argue that he is being too cautious and that he is missing out on potential investment opportunities by holding so much cash.
Others argue that he is right to be cautious and that he is better off holding cash than investing in overpriced stocks.
Charlie Munger, Warren Buffett’s long-time business partner, is also a proponent of holding cash. However, he is more cautious about holding too much cash than Buffett.
In a 2022 interview, Munger said he had never hoarded cash, waiting for better conditions. He said he had always invested in the best thing he could find, even if it meant paying a premium.
In recent years, Munger has been critical of the amount of cash that Berkshire is holding. He has said the company has “too much money” and that it should be investing more aggressively.
However, Munger is still cautious about when to invest cash. He has said he would rather “hold cash and wait for a great opportunity” than “invest in something mediocre”.