Berkshire Hathaway has $116 billion in cash according to its 87-year old CEO, Warren Buffet. However, he isn’t exactly too thrilled with this, expressing it in his annual letter to shareholders. In fact, he goes on to say that this extraordinary level of liquidity earns a very small amount and is nowhere near the level that they wish to have. They will be more than happy once they get this amount redeployed to more productive assets.
Looking for the Next Big Investment
Most people won’t complain about having excess money in their bank accounts, but for the most successful investor of all time, money not being invested is money that doesn’t earn. This is the reason why Buffet’s net worth is now up to $86.6B and isn’t showing any signs of plateauing any time soon. Still, this doesn’t mean that Buffet is going for a hasty acquisition deal. In fact, Berkshire Hathaway is on an acquisition drought as it has barely made any purchases in 2017.
The year was rough for Berkshire Hathaway as their attempts in buying Unilever ended in failure. His only sensible purchase last year was a standalone deal in buying a stake in Pilot Travel Centers LLC. He notes that one of the biggest barriers for purchase was the steadily increasing purchase price as well as the low interest rates.
Speculations are now high on what could be the next big purchase for the company and according to a recent interview, Buffet isn’t ruling out the option of buying an airline. If this does materialize, then it wouldn’t be surprising as Berkshire already has stocks in four major airlines.
The company has already bought stocks in American, Delta, and United Airlines back in 2016 and has recently bought stocks in Southwest earlier last year. Interestingly, all four stocks rose by 2% which adds incentive to acquiring any of the four airlines.
United is possibly the cheapest of the four which is worth $20 billion, while Delta is the most expensive at $40 billion. However, some speculate that acquiring Southwest would be a better deal due to its strength in the Domestic market and it is slightly cheaper coming in at $34.1 billion. If Buffet does go through with an airline acquisition of any of the four, he would still have more than double the amount left for another huge buy.
Other Possible Investment Options
Still, until Buffet makes a move, people can only speculate on what he will buy next. $116 billion is a huge amount of money and opens up a lot of potential investment and purchase options. Berkshire is also rumoured to be considering a food and consumer purchase such as General Mills or Kellogg or even Mondelez which owns Oreo. There are also rumors of buying Coca-Cola as Berkshire already has 400 million shares, making them the biggest investor in the company.
Others think that he should purchase a utility company such as NextEra Energy and going by his track record, he always considers buying companies that are basic necessities. Still others think that he should double up on tech stocks as five of the biggest companies in the US are all in the tech sector. Berkshire has recently increased its stakes in Apple by 23% and now owns 3.3% of the company. With the numbers steadily growing in this sector perhaps another purchase or an increase in stocks in the tech area is imminent as well.