Warren Buffett's company sits on 'mountain of cash'

Billionaire investor Warren Buffett's Berkshire Hathaway recorded a record $157 billion in cash in the third quarter.

Berkshire Hathaway reported third-quarter operating profit of $10.8 billion on November 4, up 40% from the same period last year. The company's cash and cash equivalents also hit a record of more than $157 billion, up from $147.4 billion in the previous quarter.

Berkshire holds most of its money in short-term investments in U.S. government bonds. In its report, the company said its interest income rose $1.3 billion in the third quarter compared to the same period last year, largely due to rising short-term interest rates.

Warren Buffett at Berkshire Hathaway's shareholders meeting. Photo: Reuters — Warren Buffett at Berkshire Hathaway's shareholders meeting. Photo: *Reuters*

Berkshire has been aggressively buying U.S. government bonds this year, despite Fitch Ratings downgrading the U.S. credit rating from AAA to AA+. On August 3, Warren Buffett, chairman and CEO of Berkshire, told CNBC that they had bought $10 billion in U.S. government bonds that week alone. "The only question for next Monday is whether we buy $10 billion in three-month or six-month bonds," he said.

The massive cash pile raises questions about whether Buffett will find attractive businesses to acquire. Charlie Munger, Berkshire's vice chairman, said in a recent interview with the Wall Street Journal that the likelihood of Berkshire making a major M&A deal while both men are in office is "at least 50 percent."

Still, Berkshire posted a net loss of $12.8 billion, up from $2.8 billion in the same period last year. Investment losses were $23.5 billion last quarter, up from $10.4 billion in the same period last year.

Buffett said operating income more closely reflects the company’s business performance. That’s because accounting rules require Berkshire to recognize estimated gains and losses from its investment portfolio when it reports net income. So a falling stock market would weigh on overall results, even if Berkshire’s core businesses are still performing well.

The rally in U.S. stocks stalled in the third quarter as surging government bond yields offered investors better opportunities to make money. The S&P 500 fell 3.6% in the third quarter.

Apple’s biggest stock investments also took a hit. Apple fell 12% in the third quarter. American Express fell 14%, Coca-Cola fell 7% and Bank of America fell 4.6%.

By contrast, Berkshire’s insurance business generated a profit of $2.4 billion, up from a loss of $1.1 billion last year. Rising auto premiums and falling claims helped the business return to profit.

Berkshire also bought $1.1 billion in treasury stock in the third quarter, bringing its total stock repurchases year-to-date to $7 billion.

Ha Thu (according to WSJ)

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