Holding $373 billion in cash—experts offer advice to Buffett's successor

Nebraska Omaha Electric — For Greg Abel, the newly appointed CEO of Berkshire Hathaway, the most critical “hundred-billion-dollar challenge” at the moment is how to utilize the company’s massive cash reserves.

On the day before Berkshire’s annual shareholders meeting, at the 17th Annual Value Investing Conference hosted by Gabelli Funds in Omaha, Nebraska, senior Berkshire research analyst and chief investment officer of Semper Augustus, Chris Bloomstran, made the above statement.

By the end of the year, Berkshire’s cash holdings totaled $373 billion. Bloomstran and other members of the discussion panel proposed some acquisition ideas to Abel. Bloomstran mentioned S&P Global: a large company with a market value of $125 billion, which owns one of the top credit rating agencies—S&P Ratings.

S&P Global is also a Barron’s selected stock. Due to market concerns about the disruptive impact of AI, the stock has fallen nearly 20% this year, to $429. Bloomstran believes these concerns are exaggerated. He also pointed out that Berkshire already holds a significant stake in Moody’s, a competitor of S&P Global.

Bloomstran added that Berkshire might only need to deploy $100 billion in cash to support its insurance business, with the remaining ample funds fully capable of supporting a large acquisition.

Adam Mid, author of “The Complete Financial History of Berkshire Hathaway,” stated that Berkshire could consider a full acquisition of the remaining shares of Western Oil. Berkshire already owns over 25% of this energy company. Western Oil’s current stock price is about $59, and a full acquisition could cost over $50 billion.

Mid also mentioned Copart, a leading company in the auction of damaged or scrapped cars (usually sold by insurance companies). He pointed out that the company has only one peer competitor, and its stock price has plummeted nearly 50% over the past year. He said that Copart’s market value is about $30 billion, with its valuation falling below a 20x P/E ratio, making it suitable for Berkshire to consider, with the current stock price around $33.

Brett Gardner, author of “Berkshire Hathaway’s Early Investment Journey,” mentioned Kinsale Capital Group. This is a highly profitable specialty property and casualty insurance company. The stock has fallen about 40% from its high a year ago, to $317—and hit a 52-week low on Friday.

Due to expectations of weakening industry premium pricing, the property and casualty insurance sector as a whole is under pressure.

Gardner also mentioned that Abel could focus on his own “circle of competence,” primarily in the utilities and infrastructure sectors.