Buffett’s cash trap can snare Big Tech, too

Jeff Bezos, since stepping away from Amazon.com Inc, has become the latest billionaire to head to space. Meanwhile, Facebook Inc’s Mark Zuckerberg is eyeing life in the metaverse. But don’t expect to see Warren Buffett riding on the next rocket ship for his 91st birthday this month or talking up virtual dimensions in Berkshire Hathaway Inc’s earnings report.
Unlike some of his ultra-wealthy peers, Buffett still prefers the nuts-and-bolts businesses of Planet Earth, such as keeping people’s lights on and delivering goods by freight train. That old-fashioned mind-set is why Berkshire’s market value hasn’t taken the same rocket ride as Amazon or Facebook, even though its operating earnings are much the same. With Buffett hoarding more than $100 billion of cash at Berkshire the last few years, the perception is that the investing icon has lost his touch in a technology-driven economy that would seem to be full of investment opportunities.
But even as Buffett is criticised for that cash stockpile, it actually puts him in quite good company. Amazon — now led by CEO Andy Jassy — and Zuckerberg’s Facebook are each sitting on a heap of cash, too, as are Tim Cook at Apple Inc, Sundar Pichai at Google’s parent Alphabet Inc and Satya Nadella at Microsoft Corp. Other than Berkshire, these are the most cash-rich companies in America and the most valuable.
Berkshire’s balance sheet was once a playground for Buffett and his followers, who would study the bread crumbs in his annual letter for hints about the next big acquisition. Lately, though, his followers have given up on guessing because Buffett seems to think anything worth buying is too expensive or risky now. (It doesn’t help that his most recent big acquisition, the $37 billion deal for Precision Castparts five years ago, resulted in a writedown.) Without the splashy dealmaking investors had come to expect from Buffett, there’s little for them to get excited about, regardless of how much money Berkshire earns.
As it gets set to report another unsung quarter of results Saturday, it could serve as a word of caution to the tech visionaries: There’s a downside to CEOs encouraging cults around their own investing genius that can take the focus off of the business’s profitability and durability. Buffett has basked in the personal limelight throughout his five decades building Berkshire, as Bezos did while at Amazon’s helm and Tesla Inc’s Elon Musk is doing now. But younger investors aren’t as enthralled with Buffett or his value-investing wisdom, and that’s held back Berkshire’s stock price.
What they’re missing is that Buffett built this awe-inspiring collection of engines that take turns picking up the slack when another stalls out. It’s perhaps the only conglomerate that works exactly as intended.
And especially now, its results can provide a scenic tour of the US economy as each industry and state tries to navigate its way out of the pandemic. Still, every quarter investors obsess over the cash figure, which was $145 billion at the end of March.

—Bloomberg