Editor's note: One of the world's top companies is overly cautious today. But don't fall into the same trap. According to Marc Chaikin – founder of our corporate affiliate Chaikin Analytics – sitting on the sidelines is exactly the wrong move today. In this essay, originally published in an August issue of the free Chaikin PowerFeed daily e-letter, Marc explains why this major firm can't afford to stay on the defensive for long... and why most investors can't, either.

Berkshire Hathaway Has a Big Cash 'Problem'

By Marc Chaikin, founder, Chaikin Analytics

Most folks would never think of cash as a problem...

But in a climbing market, it is.

That's especially true for asset managers. They don't get paid to sit on piles of cash. They're supposed to put that money to work.

But right now, the legendary Warren Buffett's Berkshire Hathaway (BRK-B) has a cash problem. Put simply, the company is sitting on a massive pile of it.

Now, Berkshire can be more patient than most companies – since it's investing its own money.

But after some big selling in recent quarters, the company's cash position is getting large.

As of the end of the second quarter, Berkshire was sitting on roughly $277 billion in cash. That's the highest cash position in the company's history.

To put that number in perspective, only 27 companies in the S&P 500 Index have a market cap greater than $277 billion.

In other words, Berkshire has enough cash to buy any of the other 473 companies in the index.

Today, I'll explain the simple reason why Berkshire's cash pile has surged – and an equally simple reason why this situation won't last long...

The company has been selling big chunks of its position in tech titan Apple (AAPL). It has also been trimming other holdings.

During the first half of this year, Berkshire sold more than 500 million shares of Apple. That worked out to roughly 56% of its position at the start of 2024.

After accounting for its buying, Berkshire ended up with $75.5 billion in new cash from stock sales last quarter.

As you can see in the chart below, the company's cash position is staggering...

The takeaway is simple...

Berkshire's money needs to go somewhere.

But it seems like the firm hasn't seen many attractive stocks recently. It only added two new names to its portfolio last quarter.

Berkshire bought a stake in cosmetics company Ulta Beauty (ULTA) worth roughly $266 million as of the end of the second quarter.

And it opened a position in Heico (HEI), a midsized aerospace supplier. As of the end of June, that position was worth $185 million.

It also added to its existing positions in oil and gas firm Occidental Petroleum (OXY) and satellite-radio company Sirius XM (SIRI). Otherwise, there haven't been signs that Buffett has seen major bargains in the stock market.

But the broad-market S&P 500 Index is only 2% from making new highs again... So there's no question that Berkshire will need to allocate cash eventually. An asset manager can't simply sit on the sidelines and let a strong market pass it by.

And don't let the market pass you by, either...

I'm bullish on the market right now. We've seen a lot of volatility in recent months – but we've also seen plenty of folks who were eager to "buy the dip."

In short, the market hasn't run out of bullish investors.

So if you're sitting on the sidelines with cash, don't miss out on the market's next leg higher.

Good investing,

Marc Chaikin

Editor's note: This volatile market will create unprecedented opportunities... But you need to be selective to take advantage of them. That's because right now, Marc is warning everyday investors about a dramatic market reset... one that could wreak havoc on thousands of stocks – while thousands of others soar – in the next 90 days or less. He's releasing the full details on September 19... Click here to learn more.

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