Berkshire Hathaway’s “Extraordinary Cash Position” Is No Big Deal, According to Warren Buffett

Every year, investors eagerly await Berkshire Hathaway‘s (NYSE: BRK.A)(NYSE: BRK.B) annual report. The highlight is Warren Buffett’s shareholder letter, in which he shares his folksy wisdom about investing and the company he heads. This year was particularly important because Buffett and his investment team have been selling assets and raising cash. Buffett’s comments on that cash are important to understand.

What has Berkshire Hathaway been doing?

The big story for Berkshire Hathaway in 2024 was about perhaps the most boring investment you can hold — cash. At the start of the year, the company’s balance sheet had roughly $168 billion in cash and short-term investments (mostly U.S. Treasury bills). That’s already a very large number, noting that most companies don’t have market caps that large.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Image source: The Motley Fool.

Still, by the end of the first quarter, the cash balance had grown to nearly $189 billion. By the second quarter, cash was up to roughly $277 billion. Cash increased again in the third quarter, hitting $325 billion. And Berkshire Hathaway’s cash stockpile ended 2024 at a shockingly large $334 billion.

Basically, in a single year, Buffett doubled the size of his cash position. This was largely achieved by selling shares from the company’s public stock portfolio. Some notable sales were in big-name stocks like Bank of America (NYSE: BAC) and Apple (NASDAQ: AAPL). You can speculate about what is going on, perhaps reading into the moves that Buffett is raising cash because he expects a bear market to open up better investment opportunities. But what’s really interesting here is what Buffett had to say about the company’s cash position in the annual shareholder letter.

Berkshire Hathaway is not your typical company

You should read the entire letter if you are interested in Berkshire Hathaway. The letters are always both entertaining and informative. However, there was an important quote this year when it comes to cash. In Warren Buffett’s own words:

Despite what some commentators currently view as an extraordinary cash position at Berkshire, the great majority of your money remains in equities. That preference won’t change. While our ownership in marketable equities moved downward last year from $354 billion to $272 billion, the value of our non-quoted controlled equities increased somewhat and remains far greater than the value of the marketable portfolio.

Forget the numbers; focus on what Buffett is saying about his investment approach. The investments he has in publicly traded companies may have declined, but he considers the companies that Berkshire Hathaway owns outright as equity investments, too. He isn’t managing a business as much as he is managing a portfolio of companies. It just so happens that some (OK, most) of those companies are owned entirely by Berkshire Hathaway.

Don’t overlook the importance of this statement. When you buy Berkshire Hathaway stock, you are investing alongside Buffett and his team. You are effectively hiring them to manage your money. That’s pretty much the same way you would look at a mutual fund. Reframing Berkshire Hathaway as a company and looking at it as a way to let Buffett run your money is a huge intellectual shift. There are probably better times and worse times to invest in Berkshire Hathaway, but is there really a bad time to hire a great asset manager?

Buffett is telling you what you need to know

Like the mystical oracles of antiquity, Buffett rarely comes out and directly says things. He provides clues and lets investors put the story together. However, when it comes to the way he thinks about Berkshire Hathaway, it would be hard to provide any greater clue than the one he outlined in his latest shareholder letter. Buffett and his team look at Berkshire Hathaway as a collection of stock investments, and that is probably how you should look at the company, too.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $765,576!*