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Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) is one of the most closely watched stocks on Wall Street. Its CEO, Warren Buffett, is one of the most followed investors of the modern era.
The next five years could be very transformative for Berkshire Hathaway. Here are two potentially large changes to watch for.
Berkshire Hathaway had a big 2024 in one important way
Investors were watching Berkshire Hathaway all year long in 2024, which isn't unusual. But there was one financial statement that seemed to make the news more than any of the others: the balance sheet. The giant conglomerate started the year with nearly $168 billion in cash. That's a lot of money, to be sure, but the cash hoard only went higher from there.
In the second quarter, thanks largely to asset sales within the company's stock portfolio, the cash balance increased to roughly $277 billion. It went up to $325 billion in the third quarter. And Berkshire Hathaway's balance sheet ended the year with $334 billion worth of cash and short-term investments on it. In one year, Buffett and his team nearly doubled the cash they had available to them for investing.
There are any number of reasons for why the cash hoard might have been raised, with the real reason remaining unknown, since Buffett isn't offering an explanation. However, there are two things that are important about Buffett's investment approach.
First, he is happy to hold cash if he can't find anything to buy. Second, when he finds something to buy, he has no problem making a sizable investment, including buying entire companies.
Five years is a long time on Wall Street. The broader markets are somewhat volatile right now, and it is entirely possible that there will be a bear market sooner rather than later. If that happens, it is highly likely that Berkshire Hathaway puts that cash to good use, expanding its already massive company portfolio. That money could be used to buy publicly traded stocks or entire companies, but either way, it is reasonable to expect big news out of the company on this front.
What about Warren Buffett?
The next issue that could come to the fore over the next five years involves Warren Buffett himself. He has been a mainstay on Wall Street for decades, providing shareholders with market-beating returns and earning him the nickname the Oracle of Omaha. But today, after such a long and incredible run, he is 94 years old, having been born in 1930 (he'll be 95 in August). To give some idea of how long that is, he was born during the Great Depression.