has filed its latest 10-Q with the SEC , and one bit of
insight reveals what Warren Buffett will do with some of the
company's $55.5 billion cash-pile.
As a result of the $12 billion acquisition of Heinz that
closed during the second quarter of 2013, Berkshire Hathaway
saw its cash dip from $49 billion to $36 billion. But thanks to
its remarkable lineup of businesses, nearly $20 billion worth of
cash has been added to its books in just one year:
Source: Company SEC Filings.
Buffett has said that "we will
maintain supreme financial strength, operating with at least $20
billion of cash equivalents." I guess that extra $35 billion is
just a cherry-on-top.
The natural question then becomes, what on Earth will he do
All signs point to the The Oracle of Omaha pouring a large
chunk of itback into the businesses that make up Berkshire
Reinvesting in proven winners
The filing covering the first six months of 2014 showed
that Berkshire Hathaway'srailroad business, Burlington
Northern Santa Fe Railway, and its energy and utilities unit had
$4.6 billion in combined capital expenditures, which are the
purchases of property or equipment
related to the daily operations of the business.
Berkshire Hathaway Energy
Source: Company SEC filings.
The report also noted that the two businesses "forecast
aggregate capital expenditures of approximately $6.9 billion over
the remainder of 2014." A little back of the envelop math
indicates the company will reinvest a staggering $11.5
billion into just those two businesses this year.
And that says nothing of the other businesses that make up
Berkshire.Total cash spent on capital expenditures for
Berkshire Hathaway as a whole stood at $6.1 billion though the
first six months of the year. This was up 30% from the $4.8
billion spent through the same period last year.
Why is Buffett investing so heavily in his own businesses?
I've discussed both the
operations of Berkshire Hathaway before, but in short, Buffett
understands that while these investments are costly, they can
also deliver great returns.
Although BNSF Railway has had some rough patches so far in
2014, thanks to weather issues and a number of other difficulties
that Berkshire is "working diligently," toward fixing, Berkshire
Hathaway Energy has seen profit rise by 12% to stand at $1.3
billion for the first six month of the year. Even with the 3% dip
in BNSF Railway earnings, total profit from these two businesses
combined has grown by $100 million since the same period of
How this impacts Berkshire's long-term outlook
Of course, a large chunk of the cash on hand at Berkshire
Hathaway is likely earmarked for acquisitions, but the
reinvestment efforts within Berkshire may end up being equally as
important to the long-term success of the company.
While it may grab less attention and be less fun than
imagining Buffett next huge buyout, reinvesting in a consisntenly
profitable business appearsto be exactly what is needed to
sustain the company's impressive returns. After all, in total,
earnings at Berkshire rose by nearly 9.5% through the first six
months of the year to stand at $15.5 billion.
More from The Motley Fool:
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What Warren Buffett Will Do With $55 Billion in
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