Berkshire Hathaway’s record pile of cash may indicate that Buffett is waiting for better opportunities

Berkshire Hathaway’s (BRK.A; BRK.B) cash stock has reached another high, according to the group’s third-quarter earnings released on Saturday.

Berkshire reported third-quarter operating profit of $13.5 billion, up from $10.1 billion a year ago and $11.2 billion in the previous quarter. The gains were largely due to higher insurance income.

Its cash holdings and cash equivalents rose to $381.7 billion, setting a record high.

Berkshire’s cash hoard swelled to a record high

The group’s cash pile rose again after falling slightly to $344.1 billion in the second quarter. The vast majority of Berkshire’s cash stock is invested in short-term Treasuries.

Cash stocks are important to Berkshire shareholders because they are often viewed as “dry powder” — money that can be invested in companies that meet Berkshire’s value-focused acquisition and investment strategy.

The record pile of cash may indicate that Buffet is waiting for a good deal. Investors do not see significant gains by holding cash and Treasury bills. Instead, the company is generating low-risk returns while potentially waiting for better trades in the stock market.

No buybacks

Once again, the company refrained from buying back any shares.

This extends one of the longest periods without a buyback since Buffett was granted expanded buyback authority in 2018. Companies typically buy back shares when they believe they are undervalued. Buybacks enhance investor returns by increasing the percentage of dividends each share is worth.

Investors are watching the CEO transition with interest

Investors have been particularly watching the company since the “Oracle of Omaha” said he would step down as CEO of Berkshire at the end of the year.

Berkshire’s Class B shares are up 6.1% so far this year, lagging the benchmark S&P 500’s 16.3% gain. This is a reversal from last year, when the group’s shares slightly outperformed the broader market.

The company’s stock growth will likely be affected by the loss of what analysts call the “Buffett bonus.”

Analysts say traders’ confidence in Buffett’s investment abilities has given the company higher valuations for many years. Now that he’s handed the reins to Vice President Greg Appel, the company may not benefit from that goodwill.