Once Again Warren Buffett has given us a major warning that everything is expensive
Once Again Warren Buffett has given us a major warning that everything is expensive by Simon Black – Sovereign Man
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Buffett’s holding company, Berkshire Hathaway, just announced a blockbuster quarter, earning nearly $7 billion.
And Buffett’s still sitting on over $100 billion of cash. That means he’s got enough money to buy almost any company he wants, anywhere in the world.
But the only move Buffett made in the last quarter was buying $928 million of Berkshire Hathaway stock.
Some people might say this is a sign that Buffett thinks Berkshire’s stock is incredibly undervalued.
To be fair, nobody knows Berkshire better than Buffett. And shares may present a good value at this level – an all-time high price.
But it’s clear to me that Buffett simply can’t find anything else worth buying.
Remember, Buffett’s got over $100 billion in cash (and he could use debt to fund an even larger acquisition).
So he could buy stock in any publicly traded company. Or he could buy most any private company (the last time he did this was Precision Castparts in 2016 for $32 billion).
He’s got so much cash he could even buy any one of the 451 out of 500 largest companies in the US – Nike, Starbucks, Goldman Sachs, etc.
But, nope… He just bought back some Berkshire stock.
I wrote about Buffett and his giant cash pile in February, just after Berkshire released its annual report.
Back then, Buffett had a whopping $116 billion. But still couldn’t find anything to buy. As he said:
In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price.
That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high.
As we wrote back then, it seems people are still willing to pay far too high a price for not that great of businesses.