If you’ve paid any attention to the financial news over the last 2 years, you’ve seen the questions and critiques about Warren Buffett’s cash position. In almost every interview he’s asked why is he stacking cash or why Berkshire isn’t outperforming the S&P 500. The majority of questions aren’t as brazen, but rewatch some of his interviews and you’ll see that 1 or 2 questions along those lines comes up.
Take this article by CNBC from November of last year:
Being in the enviable position of having that much cash to spend seems unenviable at the moment, as far as Berkshire shareholders, and maybe even Buffett, are concerned. Buffett’s company is currently on pace for its worst annual stock performance since 2009.
“He pinned himself into a corner a few years ago, saying I can’t have $150 billion in cash in three to four years and say that’s alright,” said Greggory Warren, a Morningstar analyst who covers Berkshire Hathaway.
Underperformance versus the index, deals that have not worked out well, such as Kraft Heinz (thought it showed signs of life in its most recent earnings), and increasing willingness on Buffett’s part to consider share buybacks, all point to the the importance of moving that cash into investments that generate a return.”
I can spend all day finding each and every article from the past 2-3 years but you understand my point.
As stocks soared to all time highs, people wondered just as they did during the tech boom whether Buffett had lost his touch. Now Buffett is sitting on a 125+ Billion dollar mountain of cash just biding his time. He’s poised more favorably than he could ever ask for, and prices are just getting more reasonable by the day.
TLDR: When you see Buffett stacking cash, he’s not an idiot. He’s waiting for prices to become reasonable again, which only happens after a significant market decline.
I’m not saying he’s an oracle, but he’s rarely wrong. If history is any indicator, Berkshire is going to reap some mighty rewards.