During the 2006 Berkshire Hathaway Annual Meeting, Warren Buffett explained why he would rather hold excess cash than do ‘dumb’ deals. Here’s an excerpt from the meeting:
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WARREN BUFFETT: Yeah. I don’t think we’ll hit any home runs, under any circumstances. But the — you might consider a normal level of cash at Berkshire as being about 10 billion, although we — you know, there could be circumstances where we’d go below that.
But because of the catastrophe insurance business we’re in and all of that, we do not — you know, we do not scrape the bottom of the barrel, but we don’t need anything like 40 billion.
I think you’ll see in the 10-Q that we have — I think it was about 37 billion at the end of March — double check that — and I’m not counting the cash and the finance business — yeah, 37-something — and we’re spending 4 billion on ISCAR.
We’ve spent — we’re spending some money on some other things as well.
But we would be happier — much happier — if we had 10 billion of cash and all the balance in things that we liked very much.
And we work toward that end at all times. But there is nothing even about the way businesses come to us.
We’ve got one idea at present, low probability, but that would take — could take — as much as 15 billion or close to 15 billion of cash. And whether it comes to fruition or not, who knows, but we do work on them.
And, what we care more — we don’t like having excess cash around. We like even less doing dumb deals because we do them forever.
I mean, if we make a dumb deal, it just sits there. We don’t resell it three months later by having an IPO of it or something of the sort.
You can listen to the entire discussion here:
Article by The Acquirer's Multiple.
