Berkshire's Cash Position Q1 '21

[Krapdivad]

We often hear of Berkshire’s cash position terms of total dollars ($145 B), which highlights its sheer size.

However, I was more interested in how the cash position looked as a percentage of Berkshire.

 

This info would guide me in my own portfolio  allocation to “guard against external calamities.”

 

Buffett received a question about this during this weekend’s meeting. He said he views Berkshire’s cash position as a percentage of its assets.

 

Looking at the latest balance sheet:

Total Cash: $145B

Total Assets: $884B

Current Percentage of Cash = 16%

 

In Buffett’s response, he said he’d like to put roughly $70 or $80 billion of cash to work, or about half his cash position.

 

So I’m piecing together that he currently has 16% of his portfolio in cash, and he’d like to keep around 8% as a cash cushion.

 

Am I getting this right?

 

What do you think about keeping a cash cushion in your own portfolios?

What percentage allows you to act with equanimity during a downturn?

[Thelilyinvestor]

I like to have 10-15%, it gets me still upside from a bull market and if the market goes down I can take some advantage of it.

Also, I think having cash and not being 100% invested can make you a bit less "emotional" about the daily swings of the market and take better decisions over the long term.

This is one of those questions where there is so many correct answers...

[LearningMachine]

Thanks @Thelilyinvestor for sharing and thanks @Krapdivad for highlighting. 

I like how Buffett openly shared, "[W]e'd love to put that to work...we won't get a chance to do it under these conditions, but conditions change very, very, very rapidly sometimes in markets."

Have we ever seen Buffett use three "very"s in a sequence to indicate how strongly he believes in being ready for that opportunity?

Edited May 6, 2021 by LearningMachine

[thepupil]

I am 106% invested at this time. In practice, that means I have ~70% of my portfolio that's 100% long (IRA's plus an unlevered taxable) and 30% that is 120%. Even then the margin requirment on the account w/ all the leverage is about 40% of NLV.

several of my holdings are excessively capitalized w/ 10-30% of their equity in net cash and I have a 6% position in PSTH, so overall net exposure is lower than 100%, but I do have 3% or so in options, 2/3 of which are calls which provide additional upside/leverage. Overall the portfolio "acts" like a slightly levered long portfolio. 

100% of my paycheck goes straight to the portfolio. <100% goes out as a margin loan to pay the bills. 

Always be buying. No market timing. this is what works for me. others can disagree. 

[Xerxes]

thepupil,

i probably have the same thinking as you do in terms of having a continuous flow from the paycheck, but cap that contribution when i hit the ceiling of the tax-free account.

i rather use the surplus $$ to do renovation work in the house, first, then adding to non-taxable account.