Berkshire Hathaway Inc. (BRK.B) Has Few Investment Options That Move The Needle

Speaking on “In The Loop,” Bloomberg’s Noah Buhayar discussed about the impact of a strong U.S. economy on Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.B). The company has about $50 billion in cash that is available for investment, but it seems as though Buffett cannot find a good place to park the money. For the record, the company reported 41 percent gain in profit to $6.4 billion in the second quarter.

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Speaking about Buffett’s areas of investment, Buhayar said Berkshire Hathaway Inc. (NYSE:BRK.B) has a foothold in consumer, industrial and utility companies. He also said that most of the companies he purchased over the past 15 years have had an incredible impact on the U.S. economy.

“[...] He has got a paint company, a brick company, a carpet company that all reflects the housing market; he has got BNSF, which is one of the country’s biggest railroads, and he has got a bunch of electric utilities and manufacturing companies that really are exposed to the U.S. economy,” said Buhayar.

In as much as Buffett is a brave investor, he has often avoided certain sectors, especially those that he doesn’t understand. Therefore, according to Buhayar, technology is one sector that is not popular with Berkshire Hathaway Inc. (NYSE:BRK.B). However, Buffett has a large stock holding in International Business Machines Corp. (NYSE:IBM).

“He always says that he likes to invest in companies that he can understand, and he doesn’t understand tech, so he has generally avoided that,” noted Buhayar concerning areas that Buffett appears to have limited interest.

Concerning the $50 billion in cash that appear to be lying idle at Berkshire Hathaway Inc. (NYSE:BRK.B), Buhayar said Buffett faces a serious challenge about where to put the money for good returns the kind that he is used to from the past investments.

“[...] This is one of the big challenges and Buffett has been very transparent about it. He said as Berkshire gets bigger it just gets harder for him to deploy all of this cash that these businesses are spinning off at the same rate of that he got earlier in his career. So when Buffett is sitting on $55 billion in cash, which is what he has now, is just that the number of companies out there that can really move the needle if you went out and bought them is relatively small, so what you are seeing is a bunch of businesses spinning of funds, but he has to wait to figure out,” Buhayar observed.

Disclosure: none

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