Berkshire's record $397 billion cash gives Greg Abel room to deploy

Berkshire Hathaway ended the first quarter with a record $397 billion in cash and short-term Treasury bills, up from $348 billion a year earlier and $129 billion three years ago.

"I can put huge amounts of money into government bonds that get 20 or 30 or 40 billion dollars a year... a good business is one that earns a lot more than the returns on essentially riskless investments, which you could define as Treasuries," Warren Buffett told CNBC.

The pile grew as Berkshire sold more stock than it bought for a 14th straight quarter, offloading $24.1 billion in equities against $16 billion in purchases. At current Treasury yields, the reserves generate roughly $20 billion a year in interest income. The company repurchased $235 million of its own shares in the quarter.

The record cash balance gives new CEO Greg Abel, in his first quarter atop the conglomerate after Buffett stepped back, room for buybacks or a major acquisition. First-quarter operating earnings rose 18 percent to $11.35 billion, while net income more than doubled to about $10.1 billion.

Abel has begun deploying capital. Shareholders approved Berkshire's $8.5 billion purchase of homebuilder Taylor Morrison, while the firm built a $31 billion Alphabet stake, including a $10 billion private purchase Buffett said he initiated. Buybacks are also running at their fastest pace since 2021.

The cash pile is large enough to buy 476 companies in the S&P 500 outright, according to data from Barchart. Berkshire has struggled to find acquisitions or stock investments that meet its valuation standards in a market trading near record highs, with the S&P 500's cyclically adjusted price-to-earnings ratio climbing above 40, a level previously reached only around major market peaks such as the dot-com era.

The record cash balance reflects patience and discipline rather than panic, giving Abel enormous firepower for the day the right opportunity appears. Second-quarter results, due around Aug. 3, will offer the first real test of how the post-Buffett era intends to deploy the hoard.

This article is for informational purposes only and does not constitute investment advice.