24 Million Reasons To Buy This Time-Tested Stock

Warren Buffett’s transformation of Berkshire Hathaway from a struggling textile firm into a powerhouse conglomerate is legendary, illustrating the quintessential investor’s dream. Last year, Berkshire Hathaway celebrated a record-breaking profit just shy of $100 billion.

Now a nonagenarian, Buffett remains at the helm and his investment moves always draw significant attention. But Berkshire’s vast cash reserves are also a prime money-maker these days. With interest income alone rivaling the cash flows of major corporations, the question arises how much does Berkshire actually produce for shareholders? The answer will astound you.

Key Points

• Berkshire Hathaway makes an enormous amount from interest income alone each day.
• In addition, free cash flows from operations produce hundreds of millions daily.
• Analysts continue to forecast good things for Berkshire based on fundamentals alone.

24 Million Reasons To Buy Berkshire

Berkshire Hathaway safeguards its financial stability by maintaining substantial cash reserves. By Q4, cash on hand increased to $167.6 billion, an increase of approximately $10 billion from the prior quarter.

The interest income generated from these reserves is impressive. Buffett favors 3 to 6-month U.S. treasury bills, and by investing Berkshire’s $126 billion of liquid reserves at a ballpark 5.3% yield, an astounding $24 million per day can be earned from interest alone.

This would amount to north of $2 billion in interest over a quarter, a far cry from the $7 billion in free cash flow that Nvidia produces over the same period, but keep in mind we only cited Berkshire’s income from cash reserves.

Berkshire’s cash flows from operations are enormous. Last quarter alone they came in at $29.7 billion, which translates to another $330 million virtually every single day.

So, Will Berkshire Keep Going Up?

With an 105% return over the past 5 years, Berkshire Hathaway’s stock has surpassed the S&P 500’s return by about 24 percentage points. This steady growth, amidst market volatility, underscores Buffett’s focus on winning the race through a tortoise versus a hare approach.

Analysts anticipate this trend will continue with an average price target of $540 per share, marking a 31% gain from present levels. Some even forecast it reaching as high as $645 per share, which would translate to another 50% plus hike from here.

Even if the most bearish projection materialized, the share price has a single digit percentage gain left in it before hitting fair value.

What Is Buffett Buying?

Buffett continues to back the stocks that have consistently delivered returns, with Coca-Cola, Apple, and American Express remaining his steadfast choices.

Additionally, he spotlighted Berkshire’s boosted investment in Occidental Petroleum, now holding a 28% share in the energy firm with approval up to 50% possible based on regulatory filings. Chevron too represents an important holding for him.

Buffett also shared insights into Berkshire’s growing investments in Japan, targeting five corporations: Mitsubishi, Mitsui, Sumitomo, Itochu, and Marubeni. He commended the management of these companies and expressed plans to keep investing in them.