Buffett cash hoard grows
Berkshire Hathaway released its 2025 shareholder letter this weekend, with many fascinating takeaways as always.
The first thing that naturally stood out is that Berkshire, under the oversight of investment guru Warren Buffett, is now sitting on a cash pile of more than US$334 billion.
This represented a notably sizeable increase of $145 billion over calendar year 2024, as the business offloaded some $134 billion of stock holdings.
Buffett previously hoarded significant levels of cash before the tech wreck and the global financial crisis, to be subsequently deployed when stock valuations were dumped.
Source: FT
Of course, these cash figures inevitably always sound vast given that Berkshire's market capitalisation recently surpassed US$1 trillion.
Berkshire has some 189 subsidiaries and owns many businesses outright, while retaining a marketable equities stock portfolio of around $272 billion (sold all the way down from $354 billion over the past year).
But even as a percentage of Berkshire's gigantic asset base this cash hoard is now moving into record territory.
For an investor who once said that cash is always a bad investment because its value can evaporate, this does appear to represent a remarkably defensive position relative to history.
Buffett may be on the lookout to use the 'elephant gun' and buy some more outstanding businesses outright over the years ahead.
Most smaller fund managers don't have the same luxury of being able to acquire businesses in their entirety, and many will presumably remain much closer to fully invested to avoid the career risk of underperforming their local stock market index.
Buffett Indicator rises
The implication here would appear to be that Buffett sees stock market valuations as unduly expensive.
He once said that if the ratio of the total value of US stocks to GDP approached 200 per cent, as was the case in the run-up to the tech bubble, then you're "playing with fire".
If we were to take the market capitalisation of the Wiltshire 5000 index as a proxy for the total value of US stocks then the ratio to GDP has been running well above this level at a ratio of around 210 per cent.
If you're thinking that you've sort of heard all of this before, then you'd most likely be right!
In fact, Berkshire has been a net seller of equities for period spanning more than two years... over the past 9 quarters reported, as recorded in the below Zero Hedge chart:
Source: Zero Hedge
Big in Japan
Despite the high valuation of US stocks, the great man has made some successful value investments over the past 5 or 6 years, including in Japan's five large "sogo shosha" trading houses, which have variously been trading at incredibly cheap valuations relative to US markets.
The total value of these holdings increased to $23.5 billion last years from an investment cost of $13.8 billion - and is expected to increase further in future years as ownership rules are relaxed a little.
The Japanese trading houses are, somewhat like Berkshire these days, invested across an array of industries and businesses - as well as being conservatively managed - and Berkshire's investments are expected to be held for "many decades" to come.
In other news, it seems that Berkshire has perhaps stopped offloading its Apple stock holdings, at the least for the time being.
Buffett noted that the Berkshire business has only paid a cash dividend to shareholders once, instead opting to reinvest funds allowing the size of the Berkshire conglomerate to mushroom.
It was heartening to read that Buffett never looks at which school (i.e. University) job applicants or candidates went to, which gave me some hope that I'm on the right lines as a small business owner, given that I never do so either!
Finally, at 94 it looks as though the great lifelong learner Buffett will soon at last step down in favour of CEO elect Greg Abel.
The king: we'll sure miss him when he's gone.
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