Warren Buffett’s House of Cash: Berkshire Hathaway (2024)

Warren Buffett’s House of Cash: Berkshire Hathaway (1)

“At Berkshire, the whole is greater — considerably greater — than the sum of the parts.” — Warren E. Buffett Chairman of the Board, Berkshire Hathaway Inc. Taken from the 2018 shareholder letter.

Berkshire Hathaway (NYSE: BRK.A) is easy to understand because it is Warren Buffett’s house of cash. Essentially, Berkshire Hathaway (NYSE: BRK.B) is designed to accumulate as much cash as possible.

For instance, Berkshire Hathaway had $111.87 billion in cash and short-term investments on December 31, 2018. Importantly, that number was down from $115.99 billion in December 2017, but up from $103.64 billion in September 2018. Notably, Berkshire accumulated $8.23 billion in cash during 3rd Quarter 2018.

Warren Buffett’s House of Cash: Berkshire Hathaway (4)

Hence, value investors need to ask how does Berkshire Hathaway rake in so much cash. Strangely, I can explain the success of Buffett’s House of Cash with one simple word: float. To elaborate, Buffett designed Berkshire to generate vast amounts of float, which leads to huge piles of cash.

In particular, Buffett himself estimates one Berkshire Hathaway company, car-insurance powerhouse GEICO generated $22.1 billion worth of float in 2018. Moreover, Buffett calculates GEICO’s float grew from $2.5 billion in 1995 to $22.1 billion in 2018 in his 2018 shareholder letter.

To clarify, float is Uncle Warren’s pet term for the cash insurers generate from premiums. In detail, the float is the difference between the premiums and the claims paid. For instance, GEICO generates float by selling a product people need; car insurance, on an installment plan. If the policyholder wants insurance, he or she has to send a cash payment every month.

Warren Buffett’s House of Cash: Berkshire Hathaway (5)

However, float can refer to any regular cash payment a business takes in. For instance, rent, mortgage payments, loan payments, credit-card payments, car payments, advertising payments, newspaper or magazine subscriptions, and utility payments.

Consequently, Berkshire Hathaway’s portfolio is filled with stocks and companies in float-producing businesses.

For example, the utility holding company, Berkshire Hathaway Energy. Berkshire-owned utilities like NV Energy generate float because customers have to pay their bills each month if they want electricity.

Tellingly, the five biggest stock holdings at Berkshire Hathaway, include credit card giant American Express (NYSE: AXP), Apple (NASDAQ: AAPL), Wells Fargo (NYSE: WFC) Coca-Cola (NYSE: KO), and Bank of America (NYSE: BAC). Tellingly, four of those five companies; American Express, Apple, Bank of America, and Wells Fargo, generate float.

Warren Buffett’s House of Cash: Berkshire Hathaway (6)

First, Amex generates float from all the credit-card payments. Notably American Express requires cardholders to pay their balance every month. Second, Wells Fargo and BofA are banks that create float with loan, mortgage, and credit-card payments.

Third, Apple collects float through iTunes, Apple Music, App Store, and other subscriptions. Notably, Apple Music can cost $9.99 a month, $14.99 a month for a family, $4.99 a month for a student, or $99 for a 12-month subscription, TechCrunch reports. Hence, Buffett owns Apple because of the float.

Buffett loves accumulating cash because he can use the cash to grow Berkshire Hathaway’s capacity to accumulate more cash.

Accordingly, Berkshire Hathaway paid $26 billion to get total control of the Burlington Northern Santa Fe Railroad (BNSF) in 2009. The BNSF records an operating income of $2.061 billion and a net income of $1.372 billion on revenues of $6.206 billion for 4th Quarter 2018.

In addition, BNSF’s year-to-year revenues grew by 12% in 2018. Meanwhile, the BNSF’s net income grew by 34% in 2018, and the railroad’s operating income grew by 8% during 2018. Hence, Buffett knows to turn cash into revenue and income.

Warren Buffett’s House of Cash: Berkshire Hathaway (7)

Buffett could buy the Burlington Northern Santa Fe because he had a huge pile of cash in 2009. Thus, Buffett got richer during the Great Financial Meltdown of 2008, because of his cash.

Under these circ*mstances, Berkshire Hathaway (NYSE: BRK.B) makes lots of money in bad years.

For instance, Berkshire Hathaway records a negative net income of -$25.392 billion, a quarterly gross profit of -$25.013 billion, and a negative operating income of -$28.013 billion for 4th Quarter 2018. In contrast Berkshire Hathaway reported an annual gross profit of $10.021 billion, an annual operating income of $10.021 billion, and an annual net income of $4.021 billion for 2018.

To clarify, Buffett blames these losses on changes to the Generally Accepted Accounting Principles (GAPP) in his 2018 letter. Specifically, a new GAPP rules requires Berkshire Hathaway to record non-cash and capital gains losses in the 4th Quarter 2018 financial report.

Warren Buffett’s House of Cash: Berkshire Hathaway (8)

However, Buffett notes that Berkshire Hathaway’s consistent and satisfactory operating earnings grew by 41% between 2016 and 2018. In comparison, Berkshire Hathaway reported consistent and satisfactory operating earnings of $17.6 billion in 2016 and $24.8166 billion in 2018.

Okay, so much cash is Buffett’s house of cash generating? Not surprisingly, the answer is a lot.

For instance, Berkshire Hathaway records a free cash flow of $6.348 billion and an operating cash flow of $10.845 billion for 4th Quarter 2018. Thus, Uncle Warren’s big bets on float and America are paying off.

Moreover, Berkshire Hathaway is still capable of generating a lot of revenues. For instance, Berkshire records revenues of $225.38 billion for 4th Quarter 2018 and $256.14 billion for 3rd Quarter 2018.

Thus Berkshire Hathaway still makes money when ycharts gives it a quarterly profit margin of -90.02% for 4th Quarter 2018. Berkshire can easily absorb those losses because of all of the cash it accumulates.

Warren Buffett’s House of Cash: Berkshire Hathaway (9)

Under these circ*mstances, I consider Berkshire Hathaway one of best growth stocks around because of the continuing increase in the consistent and satisfactory operating earnings and the cash.

Therefore, if you can live without dividend, Berkshire Hathaway class B (NYSE: BRK.B) is well worth having in your portfolio at the $198.70 price reported on 8 March 2019. My prediction is that Warren Buffett’s House of Cash will keep growing and growing for a long time to come.

Finally, please read Uncle Warren’s 2018 Berkshire Hathaway shareholder letter. As always you will learn something new from it as I did.

Warren Buffett’s House of Cash: Berkshire Hathaway (2024)

FAQs

Warren Buffett’s House of Cash: Berkshire Hathaway? ›

Berkshire Hathaway cash on hand for 2022 was $35.811B, a 59.39% decline from 2021.

How much of Berkshire Hathaway does Buffett own? ›

Berkshire Hathaway
Kiewit Plaza, the location of Berkshire's corporate offices in Omaha, Nebraska
Total equityUS$472.4 billion (2022)
OwnerWarren Buffett (30.71% of the aggregate voting power and 16.45% of the economic interest)
Number of employees383,000 (2022)
SubsidiariesList of subsidiaries
19 more rows

How much money does Berkshire Hathaway have in cash? ›

Berkshire Hathaway cash on hand for 2022 was $35.811B, a 59.39% decline from 2021.

Who owns most of Berkshire Hathaway? ›

Institutional investors hold a majority ownership of BRKB through the 65.36% of the outstanding shares that they control. This interest is also higher than at almost any other company in the Multi-Line Insurance industry.

Why Berkshire Hathaway stock is so expensive? ›

A) Berkshire Hathaway has the highest-priced shares of any U.S. company, and is also one of the largest companies in the world, consistently ranking in the top 10 by market value. Buffett famously resisted splitting Berkshire's shares, something companies normally do to make it easier to trade their stock.

Does Warren Buffett own Walmart? ›

Warren Buffett was a major shareholders in Walmart until 2016, when he sold most of Berkshire Hathaway's stake in the retailer. At that time, Buffett cited Jeff Bezos and Amazon as a threat that made retail stocks a “tough” game.

Is Dairy Queen owned by Warren Buffett? ›

Warren Buffett's Berkshire Hathaway acquired Dairy Queen for nearly $600 million in 1998. Dairy Queen CEO Troy Bader told Insider that Berkshire's ownership lets him invest for the long run. Bader explained how Dairy Queen has dealt with the pandemic, inflation, and new customer demands.

How much would $1,000 invested in Berkshire Hathaway? ›

The $1,000 investment would be worth $62,841,899.58 today based on a price of $471,326.03 for Berkshire Hathaway shares today.

Which person has the most cash on hand? ›

Elon Musk, with a fortune of $266 billion, is the richest person on the planet.

What bank does Warren Buffett use? ›

Berkshire has owned both Bank of New York Mellon (BK 2.72%) and U.S. Bancorp (USB 6.07%) for more than a decade. Bank of New York Mellon is a top custodian bank and doesn't take on nearly the same amount of credit exposure through lending as other large banks.

What is the most expensive stock in the world? ›

Berkshire Hathaway Inc.

Berkshire Hathaway, the conglomerate headed by legendary investor Warren Buffett, has the most expensive stock in the world, with shares trading at over $400,000 each. Berkshire Hathaway's market capitalisation is over $640 billion, making it one of the giant companies in the world.

Who owns the most stocks in the world? ›

'Billionaire Stocks': Bill Gates, Berkshire Hathaway (BRK.B)

The natural stock pick held by the world's wealthiest person is Microsoft (NASDAQ:MSFT), the giant tech company Bill Gates co-founded with Paul Allen in 1975. Gates still owns almost 103 million shares of the company worth $15.4 billion.

Can I buy Berkshire Hathaway stock? ›

Investors interested in buying into Warren Buffett's Berkshire Hathaway have two options: Class A stock (BRK-A) and Class B stock (BRK-B). The two types of shares each provide access to the famous conglomerate, but they have important differences. The main difference between the two types of shares is their price.

Is it smart to invest in Berkshire Hathaway? ›

Berkshire Hathaway holds a diversified basket of companies in dependable industries. The company's massive cash pile is an additional safety net. The stock's attractive valuation makes it a no-brainer for investors seeking safety.

Is Berkshire Hathaway a risky stock? ›

It owns a variety of well-known private businesses, such as GEICO, and also has minority interests in public companies, such as Apple. Risks of being a Berkshire investor include issues of regulatory challenges and being a conglomerate, as well as the performance of successors when Warren Buffett retires or dies.

Does Warren Buffett own Pfizer? ›

Warren Buffett Pfizer Inc.

Warren Buffett started to build up the position in Pfizer in Q3 2020. Since then they sold 3.71 Million shares. The investor sold all their shares in Q4 2020 and doesn't own any shares in Pfizer anymore.

What 5 stocks does Warren Buffett own? ›

Top Warren Buffett Stocks By Size
  • Bank of America (BAC), 1.01 billion.
  • Apple (AAPL), 895.1 million.
  • Coca-Cola (KO), 400 million.
  • Kraft Heinz (KHC), 325.6 million.
  • Occidental Petroleum (OXY), 194.4 million.
  • Chevron (CVX), 162.9 million.
  • American Express (AXP), 151.6 million.
  • Nu Holdings (NU), 107.1 million.
Feb 14, 2023

Does Warren Buffett Own Amazon? ›

Berkshire Hathaway's Amazon.com Stake

Warren Buffett acquired 10.7 Million Amazon.com shares worth $1.13 Billion. That's 0.34% of their equity portfolio (22nd largest holding). Warren Buffett started to build up the position in Amazon.com in Q1 2019 and continued to invest until Q2 2019.

Does Warren Buffet own Dunkin Donuts? ›

Warren Buffett declined to buy a stake in Dunkin' Donuts in 1989. The donut-shop chain approached the investor to help it escape a hostile takeover. The Berkshire Hathaway CEO said he avoids takeover fights and the $35 million deal was too small.

Does Warren Buffett own Home Depot stock? ›

Berkshire Hathaway's Home Depot Stake

The first Home Depot trade was made in Q2 2005. Since then Warren Buffett bought shares two more times and sold shares on five occasions.

What does Warren Buffett eat? ›

He drinks five co*kes a day and eats McDonald's for breakfast every morning. Warren Buffett says he'd give up an extra year of his life to be able to eat anything he wants. Famously a fan of junk food, the 92-year-old has said he drinks 5 cans of co*ke a day and eats McDonald's daily.

What is Warren Buffett's most profitable investment? ›

Share of Berkshire's Portfolio

Apple is the world's most valuable public company and Warren Buffet's largest stock holding.

What was Berkshire Hathaway stock price in 1986? ›

2777.0514

What is the highest Berkshire Hathaway stock? ›

The latest closing stock price for Berkshire Hathaway as of May 05, 2023 is 323.88.
  • The all-time high Berkshire Hathaway stock closing price was 359.57 on March 28, 2022.
  • The Berkshire Hathaway 52-week high stock price is 331.84, which is 2.5% above the current share price.

Do millionaires use cash? ›

Studies indicate that millionaires may have, on average, as much as 25% of their money in cash. This is to offset any market downturns and to have cash available as insurance for their portfolios. Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires.

How much cash on hand is considered rich? ›

Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.

What is the most liquid wealth? ›

Cash on hand is considered the most liquid type of liquid asset since it is cash itself. Cash is legal tender that an individual or company can use to make payments on liability obligations.

Does Warren Buffett have a mortgage? ›

He rarely takes out loans, except for a mortgage

“If you get a 30-year mortgage it's the best instrument in the world,” Buffett told Yahoo finance, noting that he opted for a mortgage because “I thought I could probably do better with the money than have it be an all equity purchase of the house,” Buffett said.

What bank do most billionaires use? ›

Best Private Banks For Millionaires
  • Bank of America: Private Banking.
  • Citi: Private Banking.
  • HSBC: Private Banking.
  • JP Morgan: Private Bank.
  • Morgan Stanley.
  • UBS.
  • Wells Fargo: Private Bank.

Does Warren Buffett use credit card? ›

Billionaire investor Warren Buffett has expressed his disdain for credit cards several times, even saying that he pays for 98% of his own purchases with cash.

What is the most a stock has gained in one day? ›

Winner: Amazon. One day after Meta's staggering loss, another tech giant set a new record for single-day gains. On January 4, 2022, Amazon (AMZN)'s market capitalization rose by $190 billion in a single day, beating out Apple's record of $179 billion a week earlier.

What was Amazon's highest stock price? ›

Historical daily share price chart and data for Amazon since 1997 adjusted for splits. The latest closing stock price for Amazon as of May 05, 2023 is 105.66. The all-time high Amazon stock closing price was 186.12 on July 08, 2021.

Which stock split the most? ›

Apple (AAPL) has split five times. The first split happened in June of 1987. It was a two-for-one split, which means that each shareholder who owned one share of AAPL pre-split subsequently owned two shares. So, a 1,000 share position before the split turned into a 2,000 share position after the split.

Who is No 1 stock holder? ›

Rakesh Jhunjhunwala

In addition to being known as "India's Warren Buffet" and "The Big Bull," Rakesh Jhunjhunwala is one of India's most renowned and helpful stock market analysts.

Who is the rich guy from stocks? ›

Warren Buffett

Who actually controls the stock market? ›

The stock market is regulated by the U.S. Securities and Exchange Commission, and the SEC's mission is to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." Historically, stock trades likely took place in a physical marketplace.

What is America's #1 Retirement stock? ›

Warren Buffett's Berkshire Hathaway hailed as the 'No. 1 retirement stock in America' by former hedge-fund manager - MarketWatch.

Does Berkshire pay a dividend? ›

A majority of the roughly four dozen securities held in Berkshire Hathaway's $335 billion investment portfolio pays a dividend.

What happens to Berkshire when Warren dies? ›

For starters, Buffett's will includes orders not to sell any shares in Berkshire Hathaway. It's unclear who will receive his shares. Regardless, his order shows that his commitment to the company extends after his death. He won't let anyone “cut-and-run” by selling his shares.

What percent of Berkshire does Bill Gates own? ›

Bill Gates Berkshire Hathaway Inc.

That's 20.28% of their entire equity portfolio (2nd largest holding). The investor owns 1.14% of the outstanding Berkshire Hathaway stock. The first Berkshire Hathaway trade was made in Q2 2010. Since then Bill Gates bought shares thirteen more times and sold shares on 37 occasions.

What percentage of Berkshire Hathaway is Apple? ›

Apple stock (AAPL) currently represents nearly 40% of Berkshire Hathaway's equity holdings.

How many shares does Buffett own in Berkshire? ›

Warren Buffett currently owns 249,000 shares of Berkshire Class A stock, giving him a 38% ownership of the conglomerate, according to FactSet. Berkshire's Class A shares closed at a record high of $399,650 on Wednesday, bringing its 2021 advance to more than 14%.

Does Bill Gates own Costco? ›

Bill Gates Costco Wholesale Corp

The first Costco Wholesale trade was made in Q3 2002. Since then Bill Gates bought shares ten more times and sold shares on four occasions. The investor sold all their shares in Q4 2012 and doesn't own any shares in Costco Wholesale anymore.

How much of Walmart does Bill Gates own? ›

Bill Gates Walmart Inc

That's 1.17% of their equity portfolio (9th largest holding). The first Walmart trade was made in Q2 2006. Since then Bill Gates bought shares eight more times and sold shares on five occasions. The stake costed the investor $163 Million, netting the investor a gain of 179% so far.

Who is the rich guy from Berkshire? ›

Warren Edward Buffett (/ˈbʌfɪt/ BUF-it; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway.

Who has the biggest percentage of Apple? ›

Apple Inc (NASDAQ:AAPL)

Institutional investors hold a majority ownership of AAPL through the 60.55% of the outstanding shares that they control. This interest is also higher than at almost any other company in the Telecommunications Equipment industry.

Who owns the biggest percentage of Apple? ›

Apple (NASDAQ: AAPL) is owned by 59.00% institutional shareholders, 0.11% Apple insiders, and 40.89% retail investors. Vanguard Group Inc is the largest individual Apple shareholder, owning 1.28B shares representing 8.08% of the company. Vanguard Group Inc's Apple shares are currently valued at $210.48B.

Why does Berkshire own so much Apple? ›

Key Points. A core principle of Buffett's highly successful investing philosophy has been to simply buy great companies at good prices and hold them for the long term. Apple's brand strength and ecosystem have allowed it to grow into a dominant tech player.

Does Warren Buffett own Tesla? ›

Tesla isn't a Buffett stock and might never be one.

An electric vehicle (EV) pioneer. Innovative. One of the hottest stocks of the last decade. But there's at least one thing it isn't: A Warren Buffett stock.

What does Warren Buffett drive? ›

What Car Does Warren Buffett Drive? As of January 2023, the vehicle that Warren Buffett was driving was a topic of interest among many individuals. Known for his frugality and simple lifestyle, the car that the renowned investor and billionaire were driving was a modest 2014 Cadillac XTS.

How many shares does Warren Buffett own of Coca-Cola? ›

The firm now owns 400 million shares of Coca-Cola, which makes up around 8.5% of its portfolio. Berkshire Hathaway owns over 9% of Coca-Cola's shares. Investing $1,000 in Coca-Cola: The big bet by Buffett in 1988 marked one of the largest bets on a public company by the legendary investor.

What is the No 1 stock in the world? ›

Berkshire Hathaway Inc.

If you wonder which company has the highest share price in the world, here is the answer. Berkshire Hathaway, the conglomerate headed by legendary investor Warren Buffett, has the most expensive stock in the world, with shares trading at over $400,000 each.

Who is the richest stock market in the world? ›

1) New York Stock Exchange (NYSE), US – $22.77T

It was established on May 17, 1792, and consists of 2,400 listed companies. It is the world's largest stock exchange and has a market capitalization of US$ 22.77 trillion as of December 2022.

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