Berkshire Cash Balance after Q2?

[yesman182]

Curious to hear what people think Berkshires cash balance will be when he get the Q2 filling. Since so many things he was buying in Q1 are much cheaper, might we get down to the 30-40 Billion range?

[gfp]

Well that would certainly surprise me.  They have only filed with the SEC on about $800 million of additional stock purchases so far during Q2 (the most recent shares of HPQ and OXY).  Add in whatever repurchase activity we can deduce from Warren's recent SEC filings (say $1.2 Billion plus whatever they buy post 6/14).  Let's call it $2.5 Billion.

 

So that would total to about $3.3 Billion, which would be less than one quarter's cash earnings plus float growth.  Float grew at $1 Billion last quarter but has been averaging over $2 Billion per quarter lately.

 

Unless he was adding to securities like AAPL, CVX or C that would not require SEC filings anytime soon or buying stuff he is under 10% on (pretty much rules out additional Activision shares so far unless we see a filing soon) - you may actually see cash increase during the quarter.

 

They also have two acquisitions coming up in Q4 to pay for, Alleghany and a big chunk of Pilot Corporation.

 

Since they had ~$103 Billion cash at the insurance companies at the end of Q1, I would be shocked it they took it down to $30-$40 in Q2.  But who knows...

 

*edit: I should add that we may see more "cash" come off the balance sheet because he moves slightly out on duration with US treasury bonds.  In Q1 he added $5.5 Billion in US treasury fixed maturity securities - I would bet that these are very short dated and barely outside of 'cash and cash equivalents.' Also as time marches on, these new purchases revert to 'cash equivalents' as they approach maturity.  It wouldn't surprise me to see him add to 2 year, 52-week, 26-week and 13-week US government securities, which would look like depleting cash but it's not quite the same as buying equities.

Edited June 17, 2022 by gfp

[crs223]

WEB is not going to buy just because prices are lower.  During the GFC he said something like "Yeah BRK share price dropped a bunch -- but that was because the underlying value was indeed lower".  The most obvious example of this was WEB selling the airlines during the COVID panic.  We'll see -- maybe he's a net seller of now-poor businesses.  Either way I don't care... I just trust that he and the boys know what they're doing.

[sleepydragon]

16 minutes ago, crs223 said:

WEB is not going to buy just because prices are lower.  During the GFC he said something like "Yeah BRK share price dropped a bunch -- but that was because the underlying value was indeed lower".  The most obvious example of this was WEB selling the airlines during the COVID panic.  We'll see -- maybe he's a net seller of now-poor businesses.  Either way I don't care... I just trust that he and the boys know what they're doing.

yes, because at that time he thinks things could get a lot worse. But this time he has been buying recently since Feds start raising rates. 

[crs223]

Now that the Fed is not printing handing money to everyone... my hope is that some big elephants will come along needing cash on bad terms *cough* OXY

[yesman182]

Since he has always had a real fear of inflation, I wonder how much apple he might be purchasing. If he purchased a little at 150 earlier this year, I don't know why he wouldn't be buying now. He knew back then that rates would rise, he knew back then that inflation was high and he also knows apple has pricing power. As Charlie says, they might like it more than cash. 

[gfp]

32 minutes ago, yesman182 said:

Since he has always had a real fear of inflation, I wonder how much apple he might be purchasing. If he purchased a little at 150 earlier this year, I don't know why he wouldn't be buying now. He knew back then that rates would rise, he knew back then that inflation was high and he also knows apple has pricing power. As Charlie says, they might like it more than cash. 

 

That's the thing - you are assuming he bought AAPL at 150 because that was the low of the quarter and he didn't buy more than he did.  But that's not what happened - he bought AAPL at around $167.3/share in late February and tends to cluster his buys in a group around that time and then stop.  Warren may have bought more Apple shares in Q2 - who knows.  But he changes his mind a lot, based on other opportunities available to him, changing opinions, and the amount of money he has lying around.

 

[LearningMachine]

5 hours ago, gfp said:

Float grew at $1 Billion last quarter but has been averaging over $2 Billion per quarter lately.

Thanks @gfp for highlighting.

 

Have you or anyone else done rough math on how BRK’s past returns would be split among (1) Float growth, (2) leverage using float, and (3) returns on underlying businesses/stocks?

 

In times of high inflation in the past, I wonder if #1 contributed a lot on the order of 5-10% but then stopped contributing when inflation went down? 
 

I’m asking because float comes with some risk with courts and regulators rewriting insurance contracts in case of a calamity that Ajit alluded to in the last annual meeting, and knowing how much value #1 and #2 add lets us investors decide whether to hold some great businesses (that Buffett has called out to be better than BRK itself) directly or through BRK especially if one doesn’t want to sell and pay taxes on nominal inflation-based growth years after Buffett and Munger are not here.

Edited June 17, 2022 by LearningMachine

[adesigar]

I dont think Buffett will go below 70 Billion in Cash. I think we might be at 85-90 Billion by end of the month.

[Xerxes]

I am more intrigued about FFH allocation in Q2 than I am of BRK. The former has been for years waiting for quality at a price. A protracted bear market is their opportunity. 
 

on BRK, would it be too insane to say that perhaps BRK gobbled too much of its own stock in the past two years (at the back end). Clearly going forward it’s free cash flow will now have more options to be allocated (than just its own stock) but its own stock would also be attractively valued.