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Home / Business / Warren Buffett has a $ 128 billion cash pile. Wall Street can't figure out why he doesn't use it.

Warren Buffett has a $ 128 billion cash pile. Wall Street can't figure out why he doesn't use it.



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  • Berkshire Hathaway revealed when it reported third-quarter earnings on Saturday that its cash stock had grown to a record $ 128.2 billion, despite buying back $ 700 million of its own shares .
  • Wall Street is not sure why the company is not spending more money on share repurchases. Berkshire Hathaway has also not made a major acquisition since January 2016.
  • This is what four analysts said about Berkshire Hathaway's record-breaking cash.
  • Read more about Business Insider.

On Saturday, Berkshire Hathaway revealed in its third quarter earnings release that the company's cashier has ballooned to a new record.

The company, run by Warren Buffett, now has $ 1

28.2 billion in cash on hand. That's up from the $ 122.4 billion it had at the end of the second quarter, and a more than five-fold increase from the $ 23 billion company had in 2009.

This mound grew even though Berkshire Hathaway bought back $ 700 million of its own shares during the third quarter, leading Wall Street analysts from UBS, Morgan Stanley, CFRA and more to question why the company did not buy back more of its own shares.

"We are surprised that the company has not been more aggressive with share repurchases," a team of UBS analysts led by Brian Meredith wrote in a Monday note.

Berkshire Hathaway loosened its stock repurchase rule in 2018, making it easier for Buffett and Charlie Munger, Berkshire Hathaway's deputy, to authorize repurchase when the repurchase price is "below Berkshire's intrinsic value," according to the company.

But it looks like company executives aren't taking full advantage of the new rule – according to looser guidelines, Berkshire Hathaway could have bought back as much as $ 200 million more of its own shares this quarter, according to UBS.

The company has also not made a purchase since January 2016, when it completed the acquisition of a manufacturing company Precision Castparts, for $ 32 billion, according to the Wall Street Journal. In a letter to shareholders in 2018, Buffett said he hoped to invest more of Berkshire's cash, but had trouble finding deals because "prices are soaring for companies that have decent long-term prospects."

That's not to say that the company hasn't made major investments – it has. In April, Buffett joined Occidental Petroleum's bid for Anadarko, providing its own $ 10 billion investment for the $ 38 billion bid for the oil company. Buffett also holds large amounts of top company shares, including shares in Apple, Bank of America, Coca-Cola and Kraft Heinz.

Here's what four analysts said about Warren Buffett's burgeoning cash pile.


1. UBS: "We had originally predicted $ 900 million in share repurchases for the quarter"

AP Photo / Nati Harnik, File

Price Target: $ 242 (B shares)

Rating: Buy

To date, "we had originally predicted $ 900 million in share repurchases for the quarter. Given the rebate to equity that BRK shares are currently trading in and the significant excess cash balance, we remain surprised that the company has not been more aggressive with share repurchases, "wrote a team of analysts led by Brian Meredith in a Monday note.


2. Morgan Stanley: "Investors continue to ask about cash use"

David Silverman / Getty Images

Price target : $ 217 (B shares)

Rating: Equal weight

"BRK bought $ 695m of shares in 3Q, against $ 442m in 2Q and $ 1,700m in 1Q. Cash / ST investments stood at $ 124b in the quarter, versus $ 119b in 2Q, while equity investments were $ 220b vs $ 201b in 2Q, ”Michael Phillips wrote in a Monday note.

He continued: "Investors continue to inquire about cash use and may be appalled by minimal share buybacks in the quarter."


3. CFRA: "We have no clear sense of Berkshire's takeover or capital allocation strategy"

REUTERS / Rick Wilking

Price target: $ 230 (B shares)

Rating: Hold [19659020] Cash and short-term investments topped $ 124 billion on September 30, but we have no clear sense of Berkshire's takeover or capital allocation strategy, which, along with some mixed operating results, removes a catalyst from the stocks, "analyst Catherine Seifert wrote in a Monday note.


4. Morningstar: "$ 103 Billion in Dry Powder"

REUTERS / Rick Wilking

Price Target: $ 380,000 (A Shares), $ 253 (B Shares)

Rating: Buy

"The company closed its September quarter with a record $ 128.2 billion in cash and cash equivalents, up from $ 122.4 billion at the end of June (and $ 103.6 billion at the end of Q3 2018)," wrote analyst Greggory Warren in a note Saturday.

He continued: "This left Berkshire, according to our estimates, about $ 103 billion in dry powder at the beginning of the fourth quarter that could be committed to investment, acquisitions, share repurchases and dividends." [19659038] (function (d, s, id) {
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