BRK.B

How Big Is Berkshire Hathaway's Cash Hoard? Here Are 7 Companies You Might Be Shocked to Know It Could Buy Right Now.

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), the massive conglomerate led by Warren Buffett, is best known for its $365 billion stock portfolio and for its subsidiary businesses like GEICO, Duracell, and many others.

However, there's a third major component to Berkshire Hathaway's assets – its cash. Berkshire ended the third quarter of 2023 with $157 billion in cash on its balance sheet, an all-time high. And there's a high probability that this figure grew even larger by the end of last year. We'll find out when the company reports results.

It can be tough for investors to truly understand how much money that is, and how much financial flexibility it gives Berkshire. So, with that in mind, let's have some fun and look at companies Berkshire could potentially buy with its cash, and a few other key points investors should know.

7 companies that Berkshire could (theoretically) buy with cash

To be perfectly clear, I have no idea if Buffett and his team have even a mild interest in investing in any of these businesses. But just to illustrate how much cash Berkshire has, here are seven businesses with market caps lower than the $157 billion in cash Berkshire is holding.

Company

Market Cap

Nike

$154 billion

Caterpillar

$145 billion

General Electric

$141 billion

United Parcel Service

$134 billion

Boeing

$130 billion

Lowe's

$127 billion

Starbucks

$107 billion

Data source: CNBC. Market cap data as of Jan. 21, 2024.

Again, I don't know if Buffett would be interested in any of these (although I've said before that Starbucks could be an especially good fit for Buffett's style). And this is just a tiny fraction of the publicly traded companies Berkshire could buy. In fact, out of thousands of public companies on the major U.S. exchanges, there are only 59 that have market caps greater than Berkshire's cash.

Important caveats

There are three important caveats to keep in mind when it comes to Berkshire's cash stockpile, two of which lower the company's buying power and one that increases it.

  • Buffett insists on always keeping a minimum of $30 billion in cash reserves, so the actual spending power is about $127 billion. This way, Buffett would maintain adequate liquidity no matter what the economy or stock market were doing.
  • If Berkshire were to acquire a large, publicly traded company in its entirety, it would likely have to pay a premium to its current market cap to do it. For example, when Berkshire acquired mid-cap insurance company Alleghany Corporation in 2022, it paid a 29% premium to Alleghany's average stock price over the prior 30-day period.
  • Berkshire has excellent credit that gives it access to (relatively) low interest rates if it chooses to borrow money. Not that I expect it to happen, but if Buffett wanted to make a $200 billion acquisition, Berkshire could probably do it with a combination of cash and borrowed money.

Why Berkshire is in no rush to make an acquisition

Buffett has made it very clear that he has no interest in making a large acquisition unless he thinks he's getting a good deal, and that's especially true in the current environment. While interest rates are high, most of Berkshire's "cash" is actually invested in short-term Treasuries, which currently have interest rates above 5%. So, Berkshire's cash is actually generating billions of dollars in additional cash for the company. And Berkshire's risk-adjusted returns would have to be significantly higher than the yield it gets from its cash in order to get Buffett interested.

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Matthew Frankel, CFP® has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, Nike, and Starbucks. The Motley Fool recommends Lowe's Companies and United Parcel Service and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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