Warren Buffett‘s record-breaking cash pile at Berkshire Hathaway Inc. BRK BRK is not indicative of an impending market crash, according to a fund manager.
What Happened: The $189 billion cash pile held by Berkshire Hathaway is not a cause for concern as some have suggested, reported Business Insider, citing fund manager Chris Bloomstran.
Bloomstran, who manages about $550 million in assets at Semper Augustus, Berkshire Hathaway’s largest position, believes that the cash pile does not reflect Buffett’s bearishness on the stock market or an imminent crash.
“Everybody gets excited, they go hyperbolic about it, but it’s not that big of a number,” Bloomstran said.
Berkshire Hathaway’s cash position, when measured against the firm’s total assets, is about in line with its long-term average, according to Bloomstran. The current cash position of 17.5% is close to the 13% average since 1997.
When measured against the firm’s market valuation, Berkshire Hathaway’s $189 billion cash is also at a relatively normal level, well below its peak of nearly 40% in 2004.
Berkshire Hathaway is required to maintain a significant cash reserve due to its massive insurance operations. Bloomstran estimates that roughly half of the cash is legitimately deployable, leaving about $110 billion available for investment.
Why It Matters: The substantial cash reserve held by Berkshire Hathaway is part of a broader strategy. Recently, the company amassed $234.6 billion in short-term U.S. Treasury bills, surpassing the Federal Reserve’s $195 billion holdings. This move has sparked speculation that Buffett might know something others don’t.
Moreover, Berkshire Hathaway recently disclosed significant stock sales, including a reduction in its Apple Inc. AAPL holdings. Despite selling over 389 million Apple shares, the company still retains 400 million shares.
A recent poll revealed that investors overwhelmingly trust Buffett over other prominent figures like Elon Musk and Bill Ackman to manage their life savings.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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