Warren Buffett’s Berkshire Hathaway has accumulated a massive $325 billion in cash. This is due to Buffett’s investment strategy of buying undervalued stocks with low price-to-earnings ratios, which are hard to find in the current U.S. market. Buffett focuses on long-term value rather than short-term gains.
With few bargains available, the cash is being invested in short-term Treasury bills that yield an annualized 4.50%, generating about $15 billion a year in risk-free returns. The U.S. stock market saw new gains, with the S&P 500 achieving another closing record and the Nasdaq 100 rising by 0.3%. The Russell 2000 dropped 0.7% on Tuesday.
The rally was driven by technology and communication services sectors, while utilities and financials were the largest decliners. Semiconductor companies were among the worst performers. One company slumped 6.1% amid doubts about its turnaround efforts, and Microchip Technology fell 7% after announcing a factory closure in Arizona due to weak demand.
Another company gained 6.9% after enhancing its capabilities, while another rose 4.6% following the authorization of a $20 billion share buyback plan.
Buffett’s cash reserve strategy
Palantir Technologies experienced a remarkable surge, with its stock up over 300% this year, making it a favorite among retail traders.
This growth is attributed to strengthening ties with the federal government. South Korean assets plunged after President Yoon Suk Yeol declared martial law. The iShares MSCI South Korea ETF fell by approximately 4.5% at the opening on Tuesday.
The South Korean won also plummeted, making it the worst-performing major Asian currency of the day. China’s 10-year government bond yield has dropped below 2%, indicating investor skepticism about any significant turnaround in the country’s nearly half-decade economic slump. Berkshire Hathaway recently reported a $2 billion loss due to hurricanes, causing analysts to speculate about the company’s cash strategies.
The massive cash reserve allows Berkshire Hathaway to absorb heavy financial blows and capitalize on investment opportunities when markets are down. Financial experts highlight that such significant cash holdings could also cushion against unforeseen large-scale liabilities. The recent natural disasters underscore the importance of having substantial liquidity to manage unpredictable and high-cost events.
