Why Berkshire Hathaway Wins When No One Else Does

We're coming to you live from the 2014 Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  )  annual shareholder meeting in Omaha, Nebraska. We are transcribing the famous Buffett and Munger Q&A and live chatting with Fools around the globe! Click HERE to access this free live chat!

"When you need cash, it's the only thing you need."-Warren Buffett, 2014 annual Berkshire Hathaway shareholders' meeting.

Warren Buffett has scored deals for Berkshire Hathaway that other investors couldn't get.

The preferred-stock investments in Goldman Sachs  (NYSE: GS  ) , General Electric, and Bank of America are not least among the examples. Buffett was able to get high-yielding preferreds for Berkshire along with warrants to buy the common stocks at attractive prices. On the Goldman deal alone, Berkshire is sitting on a paper profit in the billions, and the stock is now among Berkshire's largest common-stock positions.

The reason that Buffett was able to get these deals is simple: Berkshire had the cash.

Buffett makes sure Berkshire keeps a significant amount of cash on its balance sheet. Today, at the annual shareholders' meeting, he said that he won't let the company's cash position go below $20 billion because he doesn't want to be dependent on "the kindness of others" when times are tough.

Not all companies think like this. In fact, few do. That means when the economy isn't doing well and other companies start looking around, wondering where they can get the cash needed to keep the lights on, Berkshire will get more great investment opportunities. 

Berkshire doesn't have the same growth and returns opportunities that it once did -- Buffet has been up front about this. But the huge and growing cash pile on the balance sheet doesn't necessarily mean that there's nothing left to do with the cash the business is earning. It simply reflects Buffett's insistence on keeping Berkshire safe in economic downturns and building a war chest to put to work when the opportunities are ripe.

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Matt Koppenheffer

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