Warren Buffett's record cash pile is starting to make people nervous
Warren Buffett is unwinding his most profitable trade in history, filling Berkshire Hathaway Inc.’s coffers with cash. But it is unclear if the Oracle of Omaha is ready to go elephant-hunting with his recent bounty.
Buffett last Saturday revealed that he had continued to slash his position in iPhone maker Apple Inc. and other stocks in the third quarter, generating US$97 billion in gains for Berkshire Hathaway, the sprawling industrial-to-insurance conglomerate he has controlled since 1965.
By crystallizing a gain, Buffett has raised Berkshire’s cash levels to unprecedented heights. At US$325 billion, cash now accounts for 28 per cent of Berkshire’s asset value — the highest level since at least 1990. And it has left his followers attempting to pinpoint the motivation for the sale.
It begs the question, 'Why is so much cash being built up?
Some investors and analysts believe Buffett, who trained under legendary value investor Benjamin Graham — first at Columbia University and then at Graham’s investment firm — is sticking to his principles. They point to Apple’s relatively high price-to-earnings ratio compared with its potential earnings growth.
Apple warned investors this week that its future products may never be as profitable as the iPhone, as it ploughs capital into artificial intelligence to try to catch up with rivals including Google owner Alphabet Inc.
Others believe something else is afoot, given Buffett’s praise for Apple over the years and a dearth of other investment opportunities, which the 94-year-old has repeatedly lamented. They have been left asking if Buffett is creating a runway for his successor, or if he sees a crisis on the horizon, giving him reason to raise cash.
“It is such a strange thing to
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