What Warren Buffett Will Do With Berkshire Hathaway Inc.'s $55 Billion in Cash

Cash at Warren Buffett's Berkshire Hathaway topped $55 billion at the end of June. One small clue reveals where he plans to put it.

Aug 5, 2014 at 7:20AM

Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) has filed its latest 10-Q with the SEC , and one bit of insight reveals what Warren Buffett will do with some of the company's $55.5 billion cash-pile.

Remarkable growth

As a result of the $12 billion acquisition of Heinz that closed during the second quarter of 2013, Berkshire Hathaway saw its cash dip from $49 billion to $36 billion. But thanks to its remarkable lineup of businesses, nearly $20 billion worth of cash has been added to its books in just one year:

Berkshire Hathaway Cash
Source: Company SEC Filings.

Buffett has said that "we will always maintain supreme financial strength, operating with at least $20 billion of cash equivalents." I guess that extra $35 billion is just a cherry-on-top.

The natural question then becomes, what on Earth will he do with it?

All signs point to the The Oracle of Omaha pouring a large chunk of it back into the businesses that make up Berkshire Hathaway.

Reinvesting in proven winners

The filing covering the first six months of 2014 showed that Berkshire Hathaway's railroad business, Burlington Northern Santa Fe Railway, and its energy and utilities unit had $4.6 billion in combined capital expenditures, which are the purchases of property or equipment related to the daily operations of the business.


Capital Expenditures

Berkshire Hathaway Energy

$2.4 billion

BNSF Railway

$2.2 billion

Source: Company SEC filings.

The report also noted that the two businesses "forecast aggregate capital expenditures of approximately $6.9 billion over the remainder of 2014." A little back of the envelop math indicates the company will reinvest a staggering $11.5 billion into just those two businesses this year.

And that says nothing of the other businesses that make up Berkshire. Total cash spent on capital expenditures for Berkshire Hathaway as a whole stood at $6.1 billion though the first six months of the year. This was up 30% from the $4.8 billion spent through the same period last year.

Impressive delivery

Why is Buffett investing so heavily in his own businesses?


I've discussed both the energy and railroad operations of Berkshire Hathaway before, but in short, Buffett understands that while these investments are costly, they can also deliver great returns.

Although BNSF Railway has had some rough patches so far in 2014, thanks to weather issues and a number of other difficulties that Berkshire is "working diligently," toward fixing, Berkshire Hathaway Energy has seen profit rise by 12% to stand at $1.3 billion for the first six month of the year. Even with the 3% dip in BNSF Railway earnings, total profit from these two businesses combined has grown by $100 million since the same period of 2013.

How this impacts Berkshire's long-term outlook

Of course, a large chunk of the cash on hand at Berkshire Hathaway is likely earmarked for acquisitions, but the reinvestment efforts within Berkshire may end up being equally as important to the long-term success of the company.

While it may grab less attention and be less fun than imagining Buffett's next huge buyout, reinvesting in a consistently profitable business appears to be exactly what is needed to sustain the company's impressive returns. After all, in total, earnings at Berkshire rose by nearly 9.5% through the first six months of the year to stand at $15.5 billion.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Patrick Morris owns shares of Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
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Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

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Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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