Billionaire investor Warren Buffett has addressed concerns regarding the record cash pile of Berkshire Hathaway Inc. (NYSE:BRK).
What Happened: In a letter to shareholders on Saturday, Buffett reassured of his commitment to owning businesses, amidst the company’s cash reserves reaching an all-time high due to a lack of major acquisitions and a sell-off of stocks.
The 94-year-old investor’s decision to address the cash pile, which stood at $334.2 billion at the end of last year, comes amid record valuations that have made US stocks less appealing and made it difficult for Buffett to find major deals.
Buffett assured shareholders that a substantial majority of their money would be deployed in equities, primarily American, many of which have significant international operations.
"Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities -- mostly American equities although many of these will have international operations of significance," Buffett said.
This statement was released alongside Berkshire’s Q4 results, which showed a $9 billion increase in the cash pile as Buffett reduced stakes in stocks, including significant sales of shares in Citigroup and Bank of America.
Also Read: Berkshire Hathaway Q4 Profits Soar 71%, Buffett Says Firm Pays More Taxes Than ‘Tech Titans’ With Market Value in ‘Trillions’
Over the past year, the company’s cash pile has nearly doubled as it reinvested the proceeds from stock sales, including tens of billions of dollars’ worth of shares in Apple, into Treasury bills.
"We were aided by a predictable large gain in investment income as Treasury Bill yields improved and we substantially increased our holdings of these highly liquid short-term securities," Buffett added in his letter.
"Paper money can see its value evaporate if fiscal folly prevails. In some countries, this reckless practice has become habitual, and, in our country's short history, the US has come close to the edge. Fixed-coupon bonds provide no protection against runaway currency," Buffet shared.
Why It Matters: Buffett’s reassurance comes at a crucial time when the company’s cash reserves have reached an all-time high due to a lack of major acquisitions and a sell-off of stocks.
The investor’s commitment to owning businesses and preference for “ownership of good businesses” over cash-equivalent assets is a strong message to shareholders about the company’s investment strategy.
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