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How can Berkshire spend $300B in T-Bills? It will take some doing. Berkshire's largest spendings, if I have my numbers right, were $40B to acquire BNSF and $40B on Apple stock. It spent $68 on stock purchases in 2022, by far its biggest year, and it's spent $80B on stock repurchases since 2012. What is the most realistic scenario for spending $300B?

Wow, who knows? It will take a while to allocate but in relative order, I’d guess:

Huge Buybacks, more U.S. equities, more international equities, large acquisitions, “bolt on”acquisitions, special dividends, lender to other big businesses in need of funds with preferreds with high yield/ warrants (like OXY).

Will be quite fascinating to see it all unfold over the years and the similarities and differences between Greg & Warren.

Maybe the market will leave Berkshire trundling along at 1.25 times book for a few years after Mr Buffett is no longer in charge, or no longer seen to be in charge. An ongoing buyback scheme would burn off steam gradually, but perhaps after a while, preferably during a particularly weak stretch of pricing, management does a bazillion dollar dutch auction tender offer. That could burn off $300bn overnight.

The problem is that all great businesses are, as a rule, great for only so long. Most moats fade away at some point, so any portfolio of the "best" businesses needs renewal. A giant buyback would be buying more and more of whatever has been held for a very long time, much of which is past its prime. This is a distant second place to new acquisitions that are high quality businesses with not-yet-stale time horizons. If only they can be found.

Buybacks increase value per share only very slightly because it takes very large purchases at very large discounts to fair value to make a difference. But their rationale relies on the non-cash holdings being very good quality. Hands up, everybody who wants a double helping of Pacificorp and Coke and Kraft and Occidental...

Jim

I suspect that, at minimum, BRK is thinking through the idea of merging CSX Corp. into BNSF to avoid disadvantaging BNSF after the Union Pacific/Norfolk Southern merger. This would likely absorb almost 1/3 of BRK's 3/31/25 cash.

I'm not at all suggesting the below example, however, in the past 17 years, there have been opportunities with distressed assets.

UNH - United Health Care

The stock is currently trading for ~2018-9 levels. (currently ~$250/sh)

There is a laundry list of reasons why it is out of favor, but is the business truly, significantly impaired moving forward?

In it's cohort, it's operating profit is some several % higher than other companies:




............................UNH.....................MCK.............CI.............CVS.............ELV
Company Name................UnitedHealth Group Inc..McKesson Corp...Cigna Group....CVS Health Corp.Elevance Health Inc
Last Price..................$252.15................$699.88.............$272.64....$62.38...........$287.35
Market Cap..................$241.34B...............$89.30B.............$79.57B....$78.81B..........$66.10B
Price / Earnings (TTM) .....11.52..................27.70...............16.50.......14.89............12.49
Annual Dividend Yield.......3.32%..................0.46%...............2.03%........4.27%............2.33%
EPS Growth Fcst3-5 Year.....+5.81%.................+12.26%.............+11.23%....+16.15%..........+12.75%
Net Profit Margin...........+5.22%.................+0.97%..............+2.11%.....+1.38%............+2.83%



A play where investment requires only to buy, then wait for the company to stabilize and then return to growth seems to be on the board.

Of course, UNH could see regulatory challenges, fines, other government impacts, technology disruptions and more corporate malfeasance.....

How can Berkshire spend $300B

There are all sorts of things that are possible. If there's a big market swoon, Berkshire might pick up some cheaper shares of stuff they like. Or they might buy something like Chubb for $100B, or the rest of Occidental for $30+B. Or similar things.

You go an buy Chubb for $100 Billion and it takes half a year to close, so you generate $20 Billion in new cash in the time between announcement and closing date and then they deliver Chubb with a $150 Billion investment portfolio inside and you just can't win can you?

I sense Mungo souring on Berkshire as a rock solid long term investment in the American economy. This is consistent with his souring on the American economy in general, so kudos on consistency. I’m curious where this economy will be in five years. Maybe Mungo is right and we will see the current administration accelerate the imperial decline of the US and watch as the center of the global economy shifts to Eurasia. Even in this bleak scenario though, the US economy will remain a giant for decades to come (barring global war and a great depression), and the portfolio of companies that Berkshire owns serving the pipes of that giant economy will continue to be essential. These businesses, it seems to me, will continue to spout cash. While buybacks may not be the best use of that cash in a stagnant economy, value generation is still likely if value investing remains the driving principle behind the management of that cash at Berkshire post Buffett. I have yet to see a shift away from these principles even as Buffett steps back from the day to day operations.

I sense Mungo souring on Berkshire as a rock solid long term investment in the American economy.

Not as much as you might think : )
It's probably still the best house on the US block, depending on what sort of building you like. Solid foundations, not sensitive to wind storms, not terribly priced, should hold its value.

The value growth slowdown is predictable, in the sense that the giant size of the firm precludes another "last hurrah" bonus from something like Apple. It's hard to beat the greatest trade of all time, so I assume they won't, and that was the only thing that prevented the inevitable slowdown from showing up sooner. But we have all known for twenty years that a slowdown in the trend rate of growth was coming at some point, so it's hardly a surprise, and is presumably in the price.

In addition, if something happens that makes the US economy 5-10-15% weaker 5-10 years from now than it would otherwise have been, other things being equal, that might mean the same for the value of a share of Berkshire. Yet even if the neighbourhood goes down hill a bit, the best house on the block is still the best house on the block.

For the optimist, Berkshire is slightly "antifragile", to use a term I hate. If the US economy takes a turn for the worse, the equity markets probably will also, so we might see a stretch during which a dollar invested gets a higher number of dollars of future return. I suspect that Berkshire would be one of the few firms prepared, both financially and philosophically, to take advantage of that. So in the "unpleasant outcome" scenarios Berkshire's rate of trend growth might fall somewhat less than that of the broad US economy. "Bear markets are good for business" really should be one of the Ferengi rules of acquisition.

Jim

“ I suspect that Berkshire would be one of the few firms prepared, both financially and philosophically, to take advantage of that. So in the "unpleasant outcome" scenarios Berkshire's rate of trend growth might fall somewhat less than that of the broad US economy.”

That’s pretty much been your position on Berkshire for the time I’ve read your posts. Track the market during bulls and beat the market during bears. Produces a net long term win. Your big caveat is that you can boost the long term returns by buying Berkshire when it trades below average PB and sell when it’s near all term highs. You do that with options. I just hold and accept the long term market beating returns from my original good fortune of buying at a low PB.

My point is I’m not sure that anything you are saying here is any different than what you’ve been saying all along. The difference is that you are sour on the US now. Not sure the damage Trump is doing to the US economy will be any better for the world economy as a whole. So … where to hide? I vote Berkshire.

“ I suspect that Berkshire would be one of the few firms prepared, both financially and philosophically, to take advantage of that. So in the "unpleasant outcome" scenarios Berkshire's rate of trend growth might fall somewhat less than that of the broad US economy.”
...
That’s pretty much been your position on Berkshire for the time I’ve read your posts. Track the market during bulls and beat the market during bears. Produces a net long term win. Your big caveat is that you can boost the long term returns by buying Berkshire when it trades below average PB and sell when it’s near all term highs. You do that with options. I just hold and accept the long term market beating returns from my original good fortune of buying at a low PB.
My point is I’m not sure that anything you are saying here is any different than what you’ve been saying all along. The difference is that you are sour on the US now. Not sure the damage Trump is doing to the US economy will be any better for the world economy as a whole. So … where to hide? I vote Berkshire.

Absolutely, my tune hasn't changed. I expect a gradual slowdown in the rate of value growth per share, which has (to my pleasant surprise) been delayed a lot longer than I expected. Value growth has been inflation + 8%/year for ages on trend, and my expectation has been a drop to a rate of about inflation + 7%. The only thing new is that if, say, the trend of real growth of the US economy in real terms takes a moderate turn for the worse for whatever reason, I expect Berkshire's value generation in real currency terms to also take a hit because they are so closely tied to the US economy. That would be an additive headwind. So maybe the 7%/year one might reasonably expect otherwise might come in at 6.5%/year, 6%/year, or 5.5%/year in the next decade??? Nobody knows.

As an investor I'm "sour" on the US only in the sense that I have cut back my participation. I simply prefer not to invest in or purchase much from places that are now declared geopolitical enemies of the countries I'm from or live in, in the same way that I don't invest in or buy stuff Russia. It's not really possible to cut off from the US that completely, but one can pull back a lot.

None of that stance means I think Berkshire is a terrible investment. For example, on Friday one could write a January 2026 $450 put option for a premium of $12.90. The two outcomes: (1) you earn income, equating to a rate of 6.5%/year added to whatever you're earning on that cash balance, so a decent return in total. If the price soars in the interim, you get most of the return in a short period of time, so the rate of return might be excellent. Or (2), you get Berkshire stock at a net entry price of $437.10. Book per share at year end might be around $322 at a guess, so that would be an entry at a P/B of 1.357, which is probably a level that guarantees a reasonably good forward return, especially compared to the likely modest gains in purchasing power to be had from holding the broad US market at these levels. What would the ten year real total return be from the S&P 500 if the valuation level at the end was the same as (say) the 20 or 25 year average and real earnings track real GDP growth? Adjusted for any big change in the level of the trade weighted dollar. Nobody knows precisely, but it's almost certainly a negative number.

Jim

mungofitch: "Maybe the market will leave Berkshire trundling along at 1.25 times book for a few years after Mr Buffett is no longer in charge, or no longer seen to be in charge. An ongoing buyback scheme would burn off steam gradually, but perhaps after a while, preferably during a particularly weak stretch of pricing, management does a bazillion dollar dutch auction tender offer. That could burn off $300bn overnight."

White Mountains does exactly that:
"White Mountains Insurance Group, Ltd. (NYSE: WTM) announced today that it has commenced a "modified Dutch auction" self-tender offer to purchase up to $300 million in value of its common shares, at a purchase price not greater than $2,050 nor less than $1,850 per share, in cash ..."
https://investor.whitemountains.com/news-releases/...

Does anyone here have experience with White Mountains and can comment on the quality or valuation of WTM?

The Jan 26 put is about $1.50, not $12.90.
Perhaps you meant the Jan 27, which is about $15.00

StoppedClock

I have zero concern about Berkshire’s ability to deploy its excess cash at highly attractive prices. None. The only unknown is when—but the whether is certain. Berkshire can and will put that capital to work.

Remember: Berkshire only needs opportunities in a tiny sliver of the market—say, 0.5% of total market cap—to find extraordinary bargains. That’s all it takes.

And per Buffett himself, it’s actually easier than ever to buy billions of dollars’ worth of stock on the open market. He’s said he was pleasantly surprised by how effortlessly Berkshire could accumulate huge positions—OXY being the prime example. And when mega-caps stumble, the liquidity and high turnover make deploying tens of billions even simpler.

So what’s the rush? Berkshire is generating over $1 billion in operating earnings every single week while it waits. The businesses are producing some of the most reliable, diversified earnings on the planet right now.

Reading some of the commentary here, you’d think Berkshire will “wither away” until the cash pile is deployed, or that deep market pullbacks—events that happen like clockwork every decade—have somehow been abolished. I have no idea when the next one comes, but at ~25× forward earnings and a ~1% dividend yield, Buffett is perfectly happy taking a risk-free, guaranteed yield equal to the current market yield while he waits.

It’s simple. And entirely rational.

" And per Buffett himself, it’s actually easier than ever to buy billions of dollars’ worth of stock on the open market. He’s said he was pleasantly surprised by how effortlessly Berkshire could accumulate huge positions—OXY being the prime example. And when mega-caps stumble, the liquidity and high turnover make deploying tens of billions even simpler."

Has it occurred to you that buying SIZE in a large cap company easily, that is dropping from 70 to 42, might mean that YOU were the buyer keeping it from dropping more quickly?


some of the conclusions reached here are priceless.

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