Berkshire Hathaway's mountain of cash

d712

I've been reading about the $100bn + in cash that Berkshire Hathaway has and how they could invest it and wanted to understand the options a bit better.

One option is to buy back some of the shares, but can they force shareholders to sell?

If Buffett loves insurance companies so much why doesn't he try and buy the State Farm, the insurance company? The spare $100 billion in cash would cover that.
This would break his rule about having $20 billion in cash but just think of the cash float that would be generated from wholly owning the two largest auto insurers in the United States, the other being GEICO!!
That would be a relatively quick way of getting the $20 billion back.
But would there be a monopoly issue in owning the companies as separate entities?

Buffett has said that he wants 90% of his wealth invested in an S&P500 index fund after his death. Are there any regulations that prevent a holding company like Berkshire Hathaway from investing in an index fund?
That could be one place to invest the spare billions.

Alternatively, could Berkshire Hathaway lend the money to other financial institutions, with the option of obtaining stock or controlling the company should they default?

With that much cash they could even lend money to other countries!
These are not necessarily ideas. I’d be interested in finding out the reasons why some of these may be impractical or impossible.

jimjames

d712 wrote: »

One option is to buy back some of the shares, but can they force shareholders to sell?

If shares are traded on the stock market then no-one is forced to sell, they choose to do so

d712

Thanks

So what about the other options I mentioned?

Thrugelmir

The number of listed stock market companies is diminishing. Opportunities to buy into undervalued companies is likewise therefore becoming more difficult. As with other conglomerates in the past (such as General Electric and Hanson Trust). Predators themselves eventually become the prey. As the old management that built the company are no more. The value of the parts being worth more than the whole.

d712

Thrugelmir wrote: »

The number of listed stock market companies is diminishing. Opportunities to buy into undervalued companies is likewise therefore becoming more difficult. As with other conglomerates in the past (such as General Electric and Hanson Trust). Predators themselves eventually become the prey. As the old management that built the company are no more. The value of the parts being worth more than the whole.

I'm not disputing that but it has nothing to do with my original post.

cloud_dog

d712 wrote: »

Buffett has said that he wants 90% of his wealth invested in an S&P500 index fund after his death. Are there any regulations that prevent a holding company like Berkshire Hathaway from investing in an index fund?

These two statements are contradictory. He is alive therefore the proposal is mute.

This statement/argument from Buffet must always be quoted in context, not merely to support your idea.

Prism

He wouldn't likely invest currently in an S&P500 index fund as he believes better returns are available elsewhere. That typically means holding on to the cash until a good opportunity comes along.

d712

cloud_dog wrote: »

These two statements are contradictory. He is alive therefore the proposal is mute.

This statement/argument from Buffet must always be quoted in context, not merely to support your idea.

It isn't contradictory. Just because he said he would have his money invested in them after his death doesn't mean that he can't invest in them while he's alive so it isn't a MOOT point.

It's an another option.

Thrugelmir

d712 wrote: »

I'm not disputing that but it has nothing to do with my original post.

Unlikely that BH sits on a $100bn of cash pile that's available to invest. More likely a far amount of that will consist of cash equivalents i.e. US Treasuries. With major insurance interests within the group there'll be regulatory solvency ratios to be adhered to.

d712

Prism wrote: »

He wouldn't likely invest currently in an S&P500 index fund as he believes better returns are available elsewhere. That typically means holding on to the cash until a good opportunity comes along.

So there are no regulations that would prevent him from investing in an index fund and he could do so if he wanted?

Could he lend the money as I mentioned in my original post?

He loves insurance companies, how about buying State Farm?

Prism

d712 wrote: »

So there are no regulations that would prevent him from investing in an index fund and he could do so if he wanted?

Well he invests in public shares of indivdual companies in addtion to buying whole companies so I don't see why not. I don't see why he would though

Could he lend the money as I mentioned in my original post?

I guess so but again he seems to prefer wating for a big buy than putting spare money into a low return illiquid loan

He loves insurance companies, how about buying State Farm?

Never heard of them