Berkshire Hathaway’s cash horde is growing to an monumental level. What Buffett will do with such large cash holdings is being looked at carefully by many market participants.
UBS believes he is looking at a significant M&A target that might be in the utility business. Possible? Yes. But, he may be angling for businesses in other industries as well.
The attributes of companies that Buffett always seeks to own are:
- Selling at a discount to their true value
- Solid businesses that are building long term value
- In industries that he clearly understands
- Have a wide competitive moat around them
- Generate steady growth year after year after year…..
I would wager that he is eyeing any number of industries. The man reads and educates himself constantly, so I am sure he has a rather extensive “potential” shopping list.
That said, he has no aversion to holding cash. The man likes to shop, but only if some type of “sale” is occurring. Otherwise, he will patiently wait for the opportune moment. With the market at a relatively high point, he is just biding his time. He probably already sees cracks in equity valuations.
Buffett has a unique position that allows him deference from the optimization of cash. His shareholders intrinsically have faith in his judgement and will stand by him through thick and thin.
When everyone is generally fully invested, Buffett keeps his “powder dry”. How many times has he come in to some company that is on their heels and he offers to float a 9% preferred issue to get them “in cash” and out of a bind? I have seen this many times in my career.
Given his more recent proclivity to buy whole companies versus taking a smaller non-controlling positions, I believe he is waiting in the wings for the opportune moment to strike. Maybe it will be M&A, but as smart as he is, I am sure he is looking at other opportunities too.
While Buffett is in his late eighties, he still looms large like a lion just bidding his time for the right time to enjoy a tasty treat!
