In short Warren Buffet and Charlie Munger, two of the greatest investors of all time leading one of the largest funds in the world just increased their cash position yet again this last quarter to $157 Billion. This would put their cash position at now over 20% of total assets under management which is totalling $746 Billion. Could Berkshire be preparing for an acquisition or a recession next year?
Case for Acquisition:
Berkshire Hathaway does have a strong history of acquisitions, some of Berkshire’s most notable acquisitions are Geico, Dairy Queen, Fruit of the Loom, Duracell, and more. That being said their most expensive acquisition ever to date was ” Precision Castparts Corp. ” in 2016 for $37 Billion. This would mean the current cash of $157 billion would be over 4 times more cash then their largest acquisition to date. And would be enough cash to purchase a company as large as Disney, IBM, or Verizon just for example.
That being said Berkshire Hathaway has only made a single acquisition since 2018 (Alleghany Corporation in 2022). Berkshire used to average more than one acquisition per year but since has severely dropped off.
Case for Recession:
Warren Buffet also increased his cash position before potential recessions and has a decent history of predicting these. As Warren Buffet has always beat the market during bear markets. www.cnbc.com/2023/05/05/warren-buffetts-berkshire-hathaway-has-been-a-fortress-stock-during-recessions-and-bear-markets-heres-how.html
In Conclusion:
I believe that based on their huge acquisition falloff in recent history for Berkshire Hathaway, it does not make sense they are preparing to make by far their largest acquisition ever. But instead preparing for a bear market early to mid next year as Buffet has done in the past. And even if they did make a large acquisition (30-40 billion) they would still be holding way more cash than average.
Based off this I am personally increasing my cash position in my own portfolio and selling off some my more risky assets in preparation for a 2024 bear market. (This is not Financial advice)
History of Berkshire Aquistions: en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway
History of Berkshire Cash: www.macrotrends.net/stocks/charts/BRK.A/berkshire-hathaway/cash-on-hand