In the first quarter of 2018, Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) was able to put more cash to work than it took in, for the first time in years. Here's why Berkshire's cash "problem" has gone on so long and why it could finally be coming to an end.
A full transcript follows the video.
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This video was recorded on May 7, 2018.
Michael Douglass: Finally, let's talk about Berkshire Hathaway's cash hoard. This is one of those other perennial major issues, because Berkshire Hathaway, as it gets bigger, it has to make bigger investments to, well, deploy its capital to do something. And they actually managed to drop it a little bit. It's $108 billion vs. $116 billion at the end of 2017.
Matt Frankel: Yeah. This was the first time it had dropped in some time. It was a nice thing for shareholders to hear. You mentioned he needs big investments. This is why he likes Apple's stock so much. He can buy a lot of Apple stock without acquiring the company or anything like that.
Reading between the lines a little bit, this indicates -- to me, at least -- that investments are starting to look a little more reasonably valued than they did in the past quarter and the end of 2017, when Berkshire said they couldn't find anything to buy. It's looking like this might be turning around. The volatility in the market, rising interest rates are starting to produce some investments that are looking a little bit attractive. Like I mentioned before, we'll find out exactly what other stocks Berkshire bought in the coming days, but this gives me hope, at least, that they might find a nice acquisition sometime this year to put more of that cash to work. Buffett only wants to keep about $30 billion of it. That leaves about $80 billion to play with still.
Douglass: Right. That's a fair amount of play money. It's certainly more than I'm going to spend in my entire life time, times, I don't know, at least several million.
Matthew Frankel owns shares of Apple and Berkshire Hathaway (B shares). Michael Douglass owns shares of Apple and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.