Berkshire Hathaway Inc. (BRK.A): Next Acquisition Might Be a Large One

Berkshire Hathaway Inc. (NYSE:BRK.A) is seeking for a large deal to put its mountain of cash to work.  In a video segment on CNBC, Jay Gelb, analyst at Barclays Capital, has said that Warren Buffetts’s Berkshire Hathaway Inc. (NYSE:BRK.A) has around $26 billion of free cash that can be invested right now and he will probably do it by funding a large deal, as soon as he finds one.

Warren Buffett portrait

At the last investor meeting, Warren Buffett said that it has the necessary cash to finance a deal worth as much as $50 billion without raising any funds by selling debt or equities. The reason why such a deal has not happened yet is that the legendary investor does not see any opportunity for now, according to Mr. Gelb.

“Unless they see a compelling deal, Berkshire won’t move to buy anything substantial”, Gelb said.

What is more important, Buffett never gets into a deal just for the sake to get rid of cash. He will “wait and see” until something evokes his interest and which will fit his investing strategy, suggests Jeff Matthews of RAM Capital.

“Warren Buffett doesn’t buy stuff just to buy stuff. [...] He is not in this for the short term. He is not into this to make next quarter’s earnings look good. [...] He is in this just for the very long term, the next fifty or hundred years”, Mr. Matthews added.

Berkshire Hathaway Inc. (NYSE:BRK.A)’s last large deal was in 2009 when it bought Burlington Northern Railroad for $26.3 billion in cash and stock. At the time, the acquisition was viewed by pundits as a bold bet on a struggling American economy.  The deal was proven to be an inspired move as the economy recovered since then and the investment bore fruit.

Last Friday, Berkshire Hathaway Inc. (NYSE:BRK.A) issued its second quarter earnings, which have beaten the analysts’ estimates by showing a 41% increase in profit to $6.4 billion.

Disclosure: none

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