Why Warren Buffett Is Holding Cash & NOT Buying Stocks

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Let's dig deeper into why Warren Buffett is holding $144 billion of cash on him, instead of choosing to invest it...
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Warren Buffett has got a gigantic cash pile on his hands, with his investing firm Berkshire Hathaway. As of the latest quarter in 2021 he’s got $144 billion dollars on him, just ripe and ready to deploy.

With all of this cash on him, you might think that he’s buying up stocks left, right and centre. But this is not the case at all, in-fact it’s quite the opposite.

As we can see, he’ barely bought any stocks this year, 5 in the first quarter, and 4 in the second quarter. And these are all extremely small buys, in-fact if you add all the buys up together, they make 1.08% of the entire portfolio. That’s nothing.
https://www.dataroma.com/m/m_activity.php?m=BRK&typ=b

Then you look at the stocks that he’s sold, and it seems that he can’t stop unloading the shares that he owns. Added all up in terms of percentage he’s sold 4 times more stocks compared to what he’s bought in 2021…
https://www.dataroma.com/m/m_activity.php?m=BRK&typ=s

So the question is why is he doing this. Why is he behaving so unusual compared to most investors who can’t stop buying. Now it’s not the easiest to find out his personal reasons for doing this, because he’s been about as quiet as a church mouse lately.

He conducted one long interview for his shareholders in May 2021, and that’s about all we’ve heard from him. He’s just been keeping it quiet, and making his moves silently tucked away in his office in Omaha.

So why. Why is Buffett holding all of this cash, $144 billion, when he could just put it in the stock market, put it in something simple like an S & P 500 index which has been doing so well recently.

Over to you Warren…

(Audio 1)

If we look back throughout history, it gives us big clues as to why Buffett’s saving up all this cash.

The somewhat comical thing about the 2008 recession, was that while most investors were panicking having the worst time of their lives, Buffett was in heaven. Stock prices were crashing, housing prices were collapsing, everyone basically lost money that year, and Buffett was smiling.

Why?

Because he could buy stocks at unbelievably cheap prices. Everything was on sale. But what was the one thing that Buffett needed if he was to take advantage of this crisis. He needed cash on him. If he didn’t have cash he wouldn’t be able to buy anything.

So in 2007 just before the recession hit, he was saving cash like a madman. He had almost $70 billion in cash, which back then was a lot of money for him. Then when the stock market crash hit, in late 2007 and throughout 2008, what do you think he did with his cash pile? He started deploying his cash and was buying stocks like a madman. Stock prices were just so cheap…

And this ended up working out very well for Buffett over the long-term, since the crisis his stock Berkshire, is up almost 500%, that’s an increase of 6 times in the price of his company…

Right now Buffett is playing the same strategy that he’s played throughout his investing career. Most investors focus on their short-term gains, Buffett focuses on the long-term, and what can we it seems to have worked out for him.

The other thing he also mentioned was that he’s always looking for those big business opportunities that come along very rarely, but when they do come along he needs a lot of cash. He needs $10’s if not $100’s of billions to buy elephant companies.

For example in 1972, Buffett needed a lot of money, at least back in those days to buy see’s candy. He bought the company outright for $25 million dollars, again a lot of money back in the day, but it paid off. In 2020, last year, See’s Candy made $383 million in sales, and $82 million in profit.
So the yearly profit is now more than triple the amount he paid for the business outright. If Buffett had not kept cash on the sidelines, he wouldn’t have been able to buy the business outright, and he wouldn’t have made this money.

Buffett needs the big cash pile for what he calls his “Elephant Gun”, it’s just in case a big business comes along, selling for a bargain, Buffett needs it on hand to snap it up…

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