Warren Buffett’s Successor Greg Abel Uses Berkshire’s $365B Cash Pile to Break 14-Quarter Selloff Streak

After taking over from Warren Buffett at the beginning of this year, the new CEO of Berkshire Hathaway, Greg Abel, carried out some serious spending on stocks, share repurchases, and acquisitions. For the three months ended 30th June, Berkshire Hathaway’s cash reserves fell 8% to $365.4 billion from $397.4 billion a quarter earlier.Part of that spending was for $4.5 billion of Berkshire share buybacks, which is much higher than the $235 million of buybacks in Q1. CFRA Research’s Cathy Seifert told a media outlet that while the buybacks are likely to encourage investors and boost their confidence, it is also a way for Greg to take the helm and assert himself.Note that Berkshire had been a net seller for the past 14 quarters, with Warren Buffett staying put during years of extreme market volatility. Last quarter, however, Abel decided to end that streak as the company purchased more stocks than it sold, for a net increase of $20 billion, including a $10 billion investment in Google’s parent company, Alphabet.Abel officially took the helm in January, and in a February letter to shareholders, he said Berkshire Hathaway uses shareholders’ capital on opportunities where the reward matches the risk.Berkshire’s Taylor Morrison, OxyChem AcquisitionsIn May, Berkshire Hathaway entered an agreement to acquire homebuilder Taylor Morrison in an all-cash deal worth $6.8 billion in equity value and $8.5 billion including debt. The deal closed on 24th July 24, and Berkshire plans to combine Taylor Morrison with its existing site-built homebuilding operations under Clayton Properties.Note that Taylor Morrison operates over 350 communities across 21 markets in 12 states, while Berkshire already owns Clayton Homes and other building-related businesses.
Abel has also overseen Berkshire’s $9.5 billion acquisition of OxyChem, the chemical business of Occidental Petroleum, which was completed on 2nd January. While the transaction was negotiated before Abel formally became CEO, it represents one of the largest capital deployments associated with the beginning of his tenure.In Q2, Berkshire’s operating earnings also rose 16% to $12.98 billion, driven by Berkshire Hathaway Energy and the BNSF railroad. Meanwhile, earnings from manufacturing, service, and retail segments rose 24% to almost $4.5 billion.Insurance, however, wasn’t as good, with underwriting earnings falling 13% and insurance investment income dropping 9%. Investors should note that GEICO was a weak spot, with underwriting profits falling 45%.Berkshire Maintains an Extraordinary Cash PileA $10 billion Alphabet investment, an $8.5 billion Taylor Morrison transaction, and billions spent on Berkshire shares are meaningful moves, but they barely dent a cash reserve exceeding $365 billion.Even after deploying tens of billions of dollars, ample funds remain available with Berkshire Hathaway for future investments, acquisitions, and market opportunities.That matters because Abel has repeatedly stressed the importance of matching potential rewards with risks. His early decisions suggest he is willing to deploy Berkshire’s capital when he believes those opportunities meet that test.If Abel continues at this pace, Berkshire’s once-famous cash hoard could become less of a symbol of Buffett-era caution and more of a war chest for the company’s next growth phase.Disclaimer: Our digital media content is for informational purposes only and does not constitute investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks, and past performance does not guarantee future returns.