Warren Buffett’s sitting on $189bn in cash. What’s this telling us?

Legendary stock market investor Warren Buffett’s currently sitting on a cash pile bigger than most FTSE 100 companies. Is this a warning to investors?

| More on:
Fans of Warren Buffett taking his photo

Image source: The Motley Fool

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Last weekend, legendary stock market champion Warren Buffett held his annual investor meeting in Omaha, Nebraska. And one of the big takeaways from the meeting was that his investment company, Berkshire Hathaway, is currently sitting on around $189bn in cash.

That’s an enormous amount to be holding. To put it in perspective, only two companies in the UK’s FTSE 100 index (AstraZeneca and Shell) have bigger market capitalisations. So what’s this huge cash pile indicating?

Massive cash pile

For a while now, Buffett’s been saying he’s looking to make a major acquisition for Berkshire Hathaway. So, in my view, the main takeaway from his monstrous cash pile is that he’s simply not seeing any acquisition opportunities that jump out at him right now.

It’s worth noting that Buffett has always liked taking his time when deploying his capital. He’s often prepared to wait for a really attractive stock market opportunity to present itself. And with decent rates on offer from cash savings products and short-term government bonds at the moment, he seems happy to wait for the right opportunity.

I don’t mind at all under current conditions building the cash position. When I look at the alternatives, what’s available in equity markets and the composition of what’s going on in the world, we find it quite attractive.

Warren Buffett

Value to be found

We could look at Buffett’s huge cash pile – and his lack of buying activity – and conclude that now’s not a good time to buy stocks. But personally, I don’t think this is the right way to look at things.

Yes, global stock markets have had a good run recently. Over the last year, the MSCI World index has risen more than 20% in GBP terms.

But most experts agree that there’s still plenty of value to be found in the market for those willing to dig around a little. Right now, I’m still seeing a lot of great investment opportunities worth considering.

An opportunity today?

Shares in Coca Cola HBC (LSE: CCH) – a major bottling partner to Coca-Cola – are a good example.

This is a company with a great track record. Over the last five years, for example, its revenue has climbed from €6.6bn to €10.2bn.

And looking ahead, it has plenty of growth potential. To my mind, it’s well-placed to benefit from increased spending on travel across Europe as well as higher levels of disposable income in developing countries.

Yet right now, it can be snapped up on a price-to-earnings (P/E) ratio of about 14. I think that’s an attractive valuation, especially when you consider that US-listed Coca-Cola (which is currently one of Buffett’s largest holdings) trades at about 22 times this year’s forecast earnings.

Of course, this stock isn’t without risk. If we were to see a major economic slowdown, revenue growth could stall.

All things considered however, I think it looks very appealing at current levels. A dividend yield of around 3.1% adds weight to the investment case.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

If I’d invested £1,000 in Tesla stock a decade ago, here’s what I’d have now!

While many of us debate whether Tesla stock is worth the price today, it's undeniable that the EV share has…

Read more »

Investing Articles

Here’s what Michael Burry did as the BP share price dipped!

The BP share price has fallen from its peaks once again, and infamous investor Michael Burry may have spotted an…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

What on earth’s going on with the Barclays share price?

The Barclays share price has skyrocketed in recent months, becoming one of the best-performing stocks on the FTSE 100 since…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Analysts say this amazing FTSE 100 stock is a takeover target!

This FTSE 100 stock's one of the worst-performing companies on the index in 2024. So why might other companies want…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

5.4% yield! 2 UK dividend shares to consider for a £1,080 passive income

I think these UK shares could provide a large and sustainable passive income. And they could be great buys today…

Read more »

Investing Articles

Here’s how investing £250 a month could bag me over £10K in passive income annually

This Fool breaks down how she would go about building a passive income stream worth over £10,000 annually to enjoy…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

I’d snap this FTSE 250 stock up in a heartbeat for juicy returns and growth!

Sumayya Mansoor explains why this FTSE 250 property stock is firmly on her radar as she looks to buy stocks…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

1 dirt-cheap FTSE 100 stock investors should consider buying in June

The FTSE 100 is littered with bargains, according to our writer. She explains why investors should be taking a closer…

Read more »