Berkshire Hathaway’s Cash Fell From $397 Billion to $366 Billion in a Single Quarter
After nearly four years of steadily amassing a cash balance of $397 billion, Berkshire Hathaway (BRKA -0.48%) (BRKB -0.41%) is finally putting a measurable amount of that money back to work.
Oh, most of it still remains on the sidelines, undeployed. Specifically, as of the end of the conglomerate’s second fiscal quarter, which ended in June, it still had nearly $366 billion in liquidity. That’s a reduction of $31 billion in just three months’ time, or less than one-tenth of its cash pile.
Still, it’s a start.
So where did all that money go? It’s not too tough to figure out.
Image source: Getty Images.
Where the money went
The biggest chunk of that $31 billion went toward the purchase of more shares of technology giant Alphabet (GOOG -1.05%) (GOOGL -1.11%). Berkshire ended Q1 with 54.2 million “A” shares of the company (worth roughly $15.6 billion at the time), plus a handful of “C” shares. Now it owns a bunch more of both, with a collective stake worth nearly $36 billion. That makes Alphabet Berkshire Hathaway’s third-biggest holding, right behind American Express.
That’s certainly not the only addition Berkshire’s current CEO Greg Abel — with some guidance from Warren Buffett, of course — made to the company’s equity portfolio during the second quarter, though. Although it already owned stakes in both, the company scooped up another 17.5 million shares of Delta Air Lines (DAL +1.80%) to bring its count to 57.3 million, and more than doubled its position in department store chain Macy’s (M +2.58%), adding another 4.3 million shares. Those trades would have cost on the order of $1.6 billion and $100 million, respectively.
Today’s Change
(-0.41%) $-2.10
Current Price
$506.03
Key Data Points
Market Cap
Day’s Range
$504.30 – $507.50
52wk Range
$464.01 – $537.74
Volume
3.3M
Avg Vol
4.6M
Gross Margin
23.52%
Expanded positions in homebuilder Lennar (LEN -1.03%) (LENB -0.81%) and The New York Times Company (NYT +0.33%) would have also used up some of Berkshire’s cash, although not nearly as much as the $17 billion it shelled out to expand its stake in Alphabet.
Perhaps Abel’s most noteworthy use of Berkshire Hathaway’s idle cash during Q2, however, wasn’t a new pick or adding to an existing one. It’s the $4.5 billion used to repurchase outstanding shares of Berkshire itself. That’s a dramatic increase from the $235 million spent on the company’s own stock in Q1, snapping a six-quarter hiatus in share buybacks.
Today’s Change
(-1.11%) $-3.80
Current Price
$338.46
Key Data Points
Market Cap
Day’s Range
$337.09 – $343.53
52wk Range
$233.23 – $408.61
Volume
23.2M
Avg Vol
30.2M
Gross Margin
60.94%
Dividend Yield
0.32%
It’s also worth noting that Berkshire Hathaway sold on the order of $3.7 billion in equity holdings during the three months in question, bolstering the conglomerate’s quarter-ending cash balance. The remainder of any difference between the sum total of these purchases minus the proceeds of these sales reflects capital spending or net costs incurred by Berkshire’s privately owned businesses, such as GEICO Insurance, Clayton Homes, Pilot Travel Centers, and Dairy Queen, just to name a few.
Picky about picks, but also patient
The allocation of this cash deployment is interesting, to be sure. Perhaps more interesting, however, is the fact that Abel is finally doing something with all of that idle capital. Yet, Berkshire’s CEO doesn’t appear to be in a rush to put it all to work at once. This patience is just as impressive as the conglomerate’s stock’s long-term price performance.
American Express is an advertising partner of Motley Fool Money. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, American Express, Berkshire Hathaway, Lennar, and The New York Times Co. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
