Warren Buffett’s Pile Of Cash Is Starting To Pay Off

Warren Buffett’s Pile Of Cash Is Starting To Pay Off

over 1 year ago2 mins

Mentioned in story

Warren Buffett’s Berkshire Hathaway reported quarterly results over the weekend, which showed that healthy income from high interest rates made up for some of last quarter’s stock losses.

What does this mean?

Warren Buffett and his right-hand man Charlie Munger have beefed up Berkshire Hathaway’s cash reserves over the last ten years, and with good reason: when you own a goliath insurance business, you need to be ready to make big payouts when catastrophe strikes. Good thing they prepared: Hurricane Ian hit Florida last quarter, and the firm was smacked with a $3.4 billion pre-tax loss as a direct result of the disaster. And holding cash is paying off in other ways now that interest rates are marching upward: the sprawling conglomerate made a mouthwatering $397 million in interest last quarter – nearly triple the amount it made at the same time last year.

Berkshire cash is generating interest

Why should I care?

Zooming in: Hamstrung by stocks.

Berkshire’s insurance business may have taken a hit last quarter, but its other companies – which straddle industries from railways to utilities and energy – managed to turn a profit while the broader economy circled the drain. The good news is that helped tick its operating profit up a better-than-expected 20% last quarter. The bad news is the firm’s stock portfolio – which includes big stakes in the likes of Apple, American Express, and Chevron – wasn’t looking quite as hale and hearty: its $20-billion drop in value last quarter meant the conglomerate made an overall loss of nearly $3 billion.

The bigger picture: Eye on the prize.

Buffett often calls these quarterly stock swings “meaningless”, which makes sense given that Berkshire’s aiming at stable, long-term success, not get-rich-or-die-trying moonshots. Case in point: while others shied away from see-sawing markets, Berkshire still swept in, buying almost $4 billion more in shares than it sold last quarter. And with the firm’s stock outperforming the S&P 500 by a healthy 17% this year alone, investors clearly aren’t knocking Buffett’s slow-and-steady philosophy. Retail investors, take note.

Berkshire beats stocks
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG