Berkshire Hathaway is sitting on nearly $400 billion in cash while Wall Street races to fresh heights, leading some observers to think the Warren Buffett-founded conglomerate is bracing for trouble.
Berkshire Hathaway ended the first quarter with a record cash pile of about $397 billion after continuing to dump stocks even as the broader market surged on artificial intelligence mania and investor optimism about the economy.
The mountain of moolah has only grown bigger as Buffett, who recently handed over Berkshire’s CEO reins to longtime lieutenant Greg Abel, warned about speculative behavior in markets and compared the explosion in short-dated options trading to gambling.
Now some Wall Street veterans believe Berkshire’s increasingly defensive posture is sending a message.
“The large and growing cash position is a sign that Berkshire doesn’t see attractive returns for investment dollars,” Derek Reisfield, the co-founder and former chairman of MarketWatch, told The Post.
“Historically Berkshire has waited for a downturn to put capital to work. And when they are able to do that, they earn outsized returns.”
Meanwhile, the major stock indexes have been hovering near record territory.
The S&P 500 is trading near all-time highs above 7,200, while the tech-heavy Nasdaq Composite continues to climb as investors pour money into AI-linked stocks and chipmakers.
Buffett, however, appears unwilling to chase the rally.
At Berkshire’s annual meeting earlier this year, the Oracle of Omaha acknowledged that high valuations have made it increasingly hard to find deals large enough to move the needle for Berkshire’s sprawling empire.
Instead, Berkshire — which has major stakes in Apple, American Express, Bank of America and Coca-Cola — has been piling cash into short-term Treasury bills while aggressively trimming portions of its equity portfolio.
The conglomerate sold about $24 billion worth of stocks in the first quarter while buying only around $16 billion.
That cautious stance has fueled speculation that Buffett and Abel believe markets have become overheated after a yearslong bull run powered largely by mega-cap technology names.
“Depending on how you calculate it, the price-earnings ratio of the S&P 500 is north of 27. The historical average is roughly 16 to 20,” Reisfeld noted.
“So the market has high expectations for performance of companies,” he added.
“If they don’t meet those expectations, if there is a recession or an economic downturn, stock prices will drop.”
Buffett has built his career on waiting for exactly those moments.
One of Berkshire’s most lucrative crisis-era bets came when it injected $5 billion into battered banking giant Bank of America in 2011.
In exchange, Berkshire secured preferred shares paying a 6% dividend along with warrants allowing it to buy hundreds of millions of shares at a steep discount.
The investment later generated tens of billions in gains as Bank of America’s stock rebounded.
Reisfield said Berkshire’s current giant war chest reflects the same playbook.
“If there is some kind of crisis, then the drop could be dramatic, and Berkshire will take advantage of the opportunity,” he said.
Buffett’s market caution comes during a major transition period inside Berkshire.
The legendary investor praised Abel during Berkshire’s annual meeting, saying the board “couldn’t have made a better decision” and adding that his successor was doing “everything I did and then some.”
Under Abel, Berkshire’s conservative approach appears firmly intact.
The company’s first-quarter operating profit rose roughly 18% year over year, helped by a sharp increase in insurance underwriting earnings.
At the same time, Berkshire’s cash reserves continued swelling despite a roughly $9.5 billion acquisition tied to Occidental Petroleum’s chemicals business earlier this year.
