The Sage of Omaha’s adage is ‘it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.’
Editor: Mark O’Byrne
But for Warren Buffett the current environment doesn’t appear to be offering up any wonderful companies at fair valuations. The situation is so bad that the cash stockpile of Berkshire Hathaway has more than doubled in the last four years, from under $40 billion to $100bn.
The infamous investor is famed for his investment approach of pouncing on companies when they run in to problems and are seemingly undervalued. At the moment though, there aren’t many out there.
The large stockpile is a likely indicator of not only how Buffett negatively views the current market environment but also how he sees the near future and what opportunities it will bring.
Buffett hates cash, he wants to spend it
Buffett has previously stated how much he hates cash, telling investors at the Berkshire AGM that it was a poor way to keep their money.
During the Omaha-based meeting Buffett expressed his frustration with a cash pile that is approaching $100 billion, ‘We shouldn’t use your money that way for long periods… The question is, ‘Are we going to be able to deploy it?”
It may well be the case that Buffett is prepared to pay a dividend, stating that dividends could be paid ‘reasonably soon, even while I am around.’ But this is unlikely.
This post was published at Gold Core on August 21, 2017.
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