Money is no object for Berkshire Hathaway (NYSE:BRKA); it’s several billion objects that have multiplication down to a science. Warren Buffett, chief executive officer and largest shareholder, has guided the company to unprecedented levels of profitability. However, speculation is growing over Berkshire’s record cash position.
According to the latest quarterly report, Berkshire is holding about $55.5 billion in cash and cash equivalents, representing an all-time for the American conglomerate that typically makes headlines for taking multi-billion-dollar positions in other companies. In comparison, Berkshire held $47 billion in cash during the second quarter of 2007, just months before the market peaked. Berkshire currently has more cash located in the Untied States than any other domestic corporation, including Apple.
Why is Buffett sitting on a record cash cushion? In the 2013 annual shareholder letter, Buffett explained that Berkshire “will always maintain supreme financial strength, operating with at least $20 billion of cash equivalents and never incurring material amounts of short-term obligations.” Despite that statement, it still doesn’t fully explain the current cash pile. Let’s dive into three possible reasons why Buffett has accumulated a record amount of cash.