REUTERS/Rick Wilking
- Warren Buffett and Charlie Munger may be hoarding cash in case they get sick and need to reassure investors, Bill Smead told Yahoo Finance this week.
- “When one of them has a medical malady, they’ve got that bazooka loaded to buy back Berkshire Hathaway stock if people panic,” said the founder and investment chief of Smead Capital Management.
- Berkshire boasted $128 billion in cash and liquid assets at the end of September, a 15% increase from the end of 2018.
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Warren Buffett may be hoarding cash in case he’s hospitalized and needs to reassure his shareholders, Bill Smead, the founder and investing chief of Smead Capital Management, told Yahoo Finance this week.
Buffett’s Berkshire Hathaway boasted $128 billion in cash and liquid assets at the end of September, a 15% increase from the end of last year, the conglomerate’s last earnings report showed.
The famed investor’s reticence towards deploying the mountain of money is “a little bit frustrating,” Smead said. The Berkshire shareholder suggested the advanced ages of Buffett and his partner, Charlie Munger, may be the reason.
“When your two key employees are 89 and 95 years old [and] one of them goes in the hospital, investors are gonna worry,” he told Yahoo Finance.
If that situation arises, Buffett and Munger may be planning to calm shareholders’ nerves by plowing Berkshire’s cash into its shares.
“When one of them has a medical malady, they’ve got that bazooka loaded to buy back Berkshire Hathaway stock if people panic,” Smead said.
The money manager supported his theory by pointing to the drop in Berkshire’s stock price after Buffett revealed he was being treated for prostate cancer in 2012. The shares rallied after Buffett was given the all-clear.
Buffett’s vast cash reserves could also reflect a dearth of quality investment opportunities. “There hasn’t been anything laid in his lap,” Smead said.
The so-called Oracle of Omaha told shareholders in February that he’s hunting for an “elephant-sized acquisition,” but he only pulled the trigger on small game this year.
Berkshire invested $10 billion in Occidental Petroleum in April to support its takeover of Anadarko Petroleum. It recently bid about $5 billion for Tech Data, only to back off after Apollo Global Management raised its offer.
