Rest assured, Warren Buffett would always prefer putting money into equities over holding cash instruments. That said, a big pile of cash in Treasury bills hasn’t exactly been painful, the billionaire investor wrote Saturday in his annual letter to shareholders of Berkshire Hathaway Inc.
“Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change,” Buffett said. (Read the letter here.)
Indeed, Berkshire’s growing pile of cash has been a source of fascination for shareholders and other investors, who read Buffett’s annual missive and pay close heed to his remarks for signals on how he might deploy cash or whether the accumulation points to concerns about the broader market.
Berkshire‘s BRK.A BRK.B latest quarterly results and annual report released Saturday morning showed cash and equivalents at $334.2 billion in the fourth quarter versus $325.2 billion in the third quarter and $276.9 billion in the second. The company’s fourth-quarter operating profit surged 71% to $14.5 billion.
That cash came in handy. Buffett kicked off the letter saying that Berkshire “did better than I expected though 53% of our 189 operating businesses reported a decline in earnings. 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.”
That said, Buffett emphasized that Berkshire would never prefer ownership of cash-equivalent assets over the ownership of “good businesses” either through controlling or partial ownership.
“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 U.S. has come close to the edge,” Buffett wrote. “Fixed-coupon bonds provide no protection against runaway currency.”
When it comes to deploying cash, Buffett offered a breakdown between Berkshire’s holdings of operating businesses, in which it owns a stake of at least 80% and often 100%, and publicly traded stocks. Those 189 subsidiaries share similarities with marketable common stocks but are far from identical, he said, including “a few rare gems, many good-but-far-from-fabulous businesses and some laggards that have been disappointments.”
Meanwhile, Berkshire’s portfolio of shares in publicly traded companies stood at $272 billion in the fourth quarter. “Understandably, really outstanding businesses are very seldom offered in their entirety, but small
fractions of these gems can be purchased Monday through Friday on Wall Street and, very occasionally, they sell at bargain prices,” Buffett wrote.
Buffett told investors that Berkshire is impartial in its choice of equity vehicles, but lamented that at times choices are limited.
”Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities,” Buffett said, while offering praise for Greg Abel, Berkshire’s vice chairman for non-insurance operations, who is expected to take over as CEO of Berkshire when Buffett is no longer at the helm.
“Greg has vividly shown his ability to act at such times as did Charlie,” the chairman wrote, referring to Charlie Munger, long known as Buffett’s “right-hand man” and a crucial partner in building Berkshire, who died in 2023 at the age of 99.
Buffett also boasted that Berkshire has paid more in corporate income tax than the U.S. government had ever received from any U.S. company. Last year, Berkshire made four payments to the Internal Revenue Service totaling $26.8 billion — about 5% of what all of corporate America paid, he said. Buffett said the tax payments were a testament to the success of Berkshire, contrasting it to a tax bill of zero when he bought the then-struggling textile manufacturer in 1965.
Berkshire did find a few ways to deploy cash in the past year, including putting more money into a basket of five Japanese conglomerates, adding to stakes that Buffett began building in 2019. Berkshire has put $13.8 billion into the companies as of the end of fiscal 2024 and the investments are now worth $23.5 billion.
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