Berkshire Hathaway’s Looking Buff And Beefy

Berkshire Hathaway’s Looking Buff And Beefy
Daniel Johnston

7 months ago2 mins

Mentioned in story

What’s going on here?

Warren Buffett’s Berkshire Hathaway posted some strong results over the weekend.

What does this mean?

Given the breadth of its holdings, Berkshire’s results often act as a mirror of the US economy’s ups and downs. And this time around, it was a tale of two halves. On one hand, rising interest rates put a damper on its real estate businesses, and its railroad business hit a few bumps, with fewer consumer goods in transit and increased competition. But on the other hand, its insurance business raked in higher premiums and cut back on ad spending to offset that damage. The result: the firm’s highest-ever quarterly operating profit at over $10 billion. And when you factor in gains from its colossal $350 billion stock portfolio, overall profit clocked in at a whopping $36 billion.

Berkshire interest income

Why should I care?

The bigger picture: Cash to splash.

Berkshire’s got a true first-world problem on its hands: lots of cash and little to spend it on. After all, market valuations are sitting pretty high these days, which has left the bargain-hunting Buffett without many attractive acquisition targets. In fact, Berkshire sold $8 billion more in stocks than it bought last quarter, leaving the firm with a whopping $147 billion in cash and short-term investments – just a hair’s breadth away from its all-time record of $149 billion. Mind you, with interest rates so high, that pile of cash isn’t just gathering dust: most of it’s invested in US Treasury bonds, which Buffett reckons could rake in $5 billion a year.

Berkshire cash

For you personally: Watch and learn.

There are a few nuggets of wisdom on offer here. First, Berkshire’s steady performance amid market turbulence underscores the importance of diversification. Second, Buffett’s cautious stance is a potential reminder to tread carefully amid the recent stock rally. And finally, if you’re sitting on cash, then don’t miss out on the high interest rates currently on offer.

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