In This Article:
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.
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.