Tuesday, May 28

Buffett’s Berkshire Stashes Record $157 Billion Cash Hoard Amid Deal Drought

Warren Buffett’s Berkshire Hathaway Inc. is sitting on a whopping cash pile of $157.2 billion, a record high, attributed to both higher interest rates and a shortage of significant investment opportunities. The conglomerate reported operating earnings of $10.76 billion, benefiting from the impact of elevated interest rates on its cash reserves. Despite efforts to ramp up acquisitions, Buffett and his team have struggled to find substantial deals. The company has recently focused on share repurchases as an alternative.

While the deal drought persists, investor interest in Berkshire remains strong. Its Class B shares reached an all-time high in September, with investors seeking diversification as a hedge against economic uncertainties. Despite some retracement, the stock has gained nearly 14% for the year.

Berkshire also allocated $1.1 billion for buybacks during the period, bringing the year’s total to around $7 billion.

The company’s diverse portfolio encompasses businesses like Geico, BNSF, Dairy Queen, and See’s Candies, making it a barometer of broader economic well-being. Berkshire reported a profit of $2.42 billion from its insurance businesses, rebounding from a loss in the previous year when the industry faced severe challenges.

Geico, which grappled with profitability issues in 2022, also turned a profit compared to the same period last year, largely due to a 54% reduction in advertising expenses year-to-date. However, BNSF, the railroad operations, saw a 15% decline in profit due to lower freight volumes and increased non-fuel operating costs.

Despite Buffett’s earlier caution that earnings in most of its operating units might dip this year as an extraordinary period for the US economy winds down, Berkshire posted robust operating earnings. The Federal Reserve’s assertive rate hikes have contributed to higher yields on the company’s primarily short-dated US Treasuries holdings.

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