After Warren Buffett‘s conglomerate Berkshire Hathaway Inc (NYSE:BRK) (NYSE:BRK) announced its third quarter results in early November. Investors are curious why he is sitting on nearly $325 billion in cash and equivalents.
What happened: Analysts are speculating about a range of reasons why the world’s most famous value investor is holding such a huge pile of cash. It may involve a takeover plan, a buyback plan upon succession, or the expectation of a market downturn.
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Stock markets have traded higher than their pre-election levels, with a looming threat of a possible pause in interest rate cuts. This has led analysts to wonder if Berkshire is avoiding investing because it can’t find any value in the markets at current levels.
‘What some describe as a ‘hot’ stock market, Warren Buffett would describe as overpriced’ Cathy Seiferta CFRA Research executive told Fortune.
Buffett’s current attitude toward cash “reflects a fundamental skepticism about the sustainability of current market valuations, the sustainability of the Trump trade, combined with the fact that they don’t see many acquisition targets that are attractive to them,” she said . .
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The 94-year-old Buffet is succeeded by Greg Abel to govern Berkshire. “The unfortunate actuarial reality is that at some point there’s going to be a change in senior management, and I suspect they’re going to want a lot of money to buy back shares of Berkshire Hathaway,” he said. Meyer SchildenManaging Director at Keefe, Bruyette & Woods to Fortune. He suggested that freely available cash could be used in the event of a sell-off for the benefit of shareholders
On the other hand, MicroStrategy Inc‘s (NASDAQ:MSTR) co-founder, Michael Saylor has said that Buffett is destroying billions of dollars of capital by not using the money they have to invest Bitcoin (CRYPTO:BTC).
“That $320 billion… that destroys $32 billion a year. They are destroying $3 billion a month in capital because they generate at best a 3% after-tax return, and the cost of capital is 15%. So take a negative 12% real return,” Saylor said.
