Cash is king of Warren Buffett. Can it finally be time to use it?
Buffetts Berkshire Hathaway Inc. reported the results for the third quarter on Saturday morning. But let's be honest, there are rarely any surprises ̵[ads1]1; at least nothing that would drastically change the investment case around Berkshire – and it was true again this time. It has long been among the least volatile stocks in the S & P 500 Index (although the price has risen 8 percent from last month's full-time), and to the extent that the US economy is doing well, Berkshire should also.
Like its peers across different industries, Berkshire's businesses have a strong quarter: BNSF Railway has benefited from improved price force and lack of lorries to move goods. The insurance business recovered from the previous loss loss driven by a number of hurricanes. And because Berkshire mainly owns American-centric companies, it has been somewhat isolated from trade tensions. Precision Castparts, the manufacturer of aerospace products manufactured in 2016, can be an exception to the need for steel and aluminum. Nevertheless, the production department has experienced an increase in revenue and profit. All of this helped Berkshire's operating profit to increase to $ 6.88 billion, against NOK 3,444 billion a year ago.
But all that's aside, the number of shareholders and buffett followers is most fascinated by these days, Berkshires money. The war bum is $ 104 billion – a slight dip from $ 111 billion in the second quarter – as rich takeover values and a competitive market for M & A continued to keep Buffett sidelined from dealmaking. In fact, Berkshire's cash holdings have risen slightly faster than the value of their stock market investments, a trend I find fascinating given that we are talking about one of the world's most successful investors. Even he can not keep up with all the money that Berkshire generates:
Buffett, Chairman and CEO, pulled the trigger on share purchases, just over $ 928 million. In July, the Board released its rules regarding the price of buybacks, which previously could not exceed a premium of 20 percent at the book value of Berkshire's shares, or a multiple of 1.2 times the book value. Now, repurchases can be made when both Buffett and Vice President Charlie Munger "believe that the repurchase price is below Berkshire's intrinsic value, conservatively determined." For what it's worth, current conditions are about 1.4, according to data prepared by Bloomberg. 19659009] This income report, however, comes to an interesting time. In a few days, the United States will vote in mid-term against the backdrop of the most vitriolic political environment in recent memory and a nation that is increasingly divided over its future. And despite significant signs of a continued healthy economy, the stock market has gone away during the past month, pulled down from concerns ranging from growth prospects to tech giants and top income of industrial companies to the ongoing trade war with China. This is where Buffett, the cheerleader in America, says that the long-term prospects for the nation are still intact, and that today's children will still be better than their parents.
Therefore, the details of Berkshire's quarterly 10-Q are less relevant to investors than what Buffet's investment decisions signal about their conviction in the United States' strength and robustness, no matter who's in the office. So, Buffett, what are you going to do with all the money?
(The piece was updated all the time to include details from Berkshire's third quarter.)
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Tara Lachapelle is a Bloomberg Opinion Socialist who deals with deals, Berkshire Hathaway Inc., Media and Telecommunications. She previously wrote a M & A column for Bloomberg News.
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