Warren Buffett, like a true modern “Scooo”, is accumulating mountains of cash in his holding company Berkshire Hathaway, recently reaching the impressive figure of 325 billion dollars. This unprecedented treasure for a private company recalls the famous images of Scrooge, diving into his pool filled with gold. But then, why does this famous investor, usually wise in allocating capital, prefer to keep so much cash on hand, even in a constantly evolving market?
During the most recent quarter, although Berkshire suffered operating losses, including due to costly hurricanes, net profits remained strong. Thanks to massive stock sales, to the tune of $133 billion this year, Berkshire has raked in substantial profits and maintains a solid gold balance sheet. This caution could be strategic: Buffett seems to anticipate economic turbulence, a possible recession or tax increases in the United States which could affect future asset sales. Rather than giving in to investment fever, he takes an observational approach, reserving the luxury of diving into buying opportunities when markets might be more favorable.
Separately, Buffett recently sold a significant portion of his Apple shares, once the mainstay of his portfolio, and reduced his stake in Bank of America. This approach reflects his caution and his distrust of current market valuations, considered too high for his taste. This mountain of cash is insurance for him, a lever to activate at the right time, in the event of a market correction or economic crisis. This is where Buffett, like Scrooge, stands ready to dive into his golden pool of cash to seize opportunities at a favorable price.
At 94, Buffett continues to demonstrate that his timeless strategy is based on patience and preparation for economic ups and downs. His designated successor, Greg Abel, will inherit not only a fortune, but also an investment philosophy anchored in prudence and anticipation of economic cycles.
Drawing by Amandine Victor for Zonebourse (all rights reserved)
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