Berkshire Hathaway Inc (NYSE:BRK.A)’s second-quarter trading statement proved once again that cash sometimes really is king in the investment world.
Piled 147 billion greenbacks deep, Warren Buffet’s empire’s cash hoard is very close to all-time highs.
Berkshire’s physical cash pile is below US$45 billion, with around US$97 billion invested in highly liquid short-term Treasury bills.
Buffet has been splashing out on T-bills recently, to put it lightly.
“Berkshire bought 10 billion in US Treasuries last Monday,” he told CNBC last week, just as ratings agency Fitch knocked the US credit rating down from AAA to AA+.
“We bought 10 billion in Treasuries this Monday. And the only question for next Monday is whether we will buy 10 billion in three-month or six-month” bills.
Given the healthy yields one can get from government debt right now due to soaring interest rates, it’s little wonder that Buffet has been ramping up Berkshire’s cash reserves.
Does this suggest that Buffet is bearish on global equities in the short to mid term?
Not necessarily; investments in equities in the second quarter ramped up over US$40 billion higher year on year to US$353.4 billion, on a fair value basis.
But Berkshire’s gargantuan cash hoard does suggest that there may be fewer bargains floating around than usual due to inflated valuations, particularly in the US tech space.
Berkshire’s quoted equities portfolio is also distorted by fluctuations in market prices, particularly among volatile tech stocks like Apple.
In reality, Berkshire actually sold US$18 billion more in equities than it purchased in the second quarter.
Perhaps the Oracle of Omaha can check out London, where the valuation gap compared to New York continues to widen.
One thing Buffet has been indulging in is share buybacks.
During the quarter, the company allocated approximately US$1.4 billion for buybacks, which increased the total expenditure on buybacks for the year to US$5.8 billion.
This has contributed to a 13.6% year-to-date increase in Class A Berkshire Hathaway stock.