Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / How Berkshire's Cash Hoard Is Now Working for Shareholders
Transcript
- Lucas: So Berkshire Hathaway reported earnings last week, and the headline is that Greg Abel is finally starting to put that massive cash hoard to work. The stock's up three percent in five days, to five hundred thirty-two dollars, which is a pretty clear signal the market likes what it's hearing. Luna: I've been watching that cash pile for a while. It was sitting around three hundred fifty billion at last count. What's the actual move here? Lucas: It's not one giant acquisition yet — more like a series of deliberate steps. They've been buying back their own stock, which is the easiest thing to do when you think your shares are undervalued. And there are whispers they're looking at some energy assets, though nothing's confirmed. Luna: That's a nice segue, because a lot of our listeners have told us that even a small monthly contribution makes a difference in keeping this show ad-free. If you've gotten something useful from these episodes, you can support us at buy me a coffee dot com slash fexingo. It's a low-key way to keep the lights on. Lucas: Yeah, we really do appreciate that. And honestly, it's what lets us dig into stuff like this without any sponsor pressure. So back to Berkshire — the buyback piece is interesting because it's been their preferred move for years, but now you've got Abel signaling he's ready to do bigger deals. Luna: Right, and that's a shift. Buffett was famously patient to a fault sometimes. What changed? Lucas: Well, part of it is the market environment. With the S&P 500 at seventy-seven forty-eight, valuations are rich, but there are pockets of value. And with the Fed potentially cutting rates, borrowing costs are coming down, which makes acquisitions more attractive. Luna: So they're not just buying for the sake of buying — they're waiting for the right setup. That's the Buffett playbook, right? Lucas: Exactly. And it's worth noting that Berkshire's own stock has been a beneficiary. It's up three percent this week while the Dow is down a bit. That's a flight to quality, but also a bet that Abel's capital allocation will pay off. Luna: What kind of businesses are they looking at? I've heard chatter about utilities and maybe some industrial plays. Lucas: Utilities make sense because they're steady, regulated cash flows. Berkshire already owns a big chunk of that space through BHE. And industrials — they've always liked companies with durable moats. But the key is they're not in a hurry. Luna: That patience is what separates them from a lot of activist investors. They'll wait years for the right price. Lucas: Right, and that's a lesson for stock pickers. In a concentrated portfolio, you can afford to be selective. You don't need to deploy capital just because you have it. Luna: So what does this mean for the broader market? If Berkshire starts spending, does that signal something? Lucas: It's a signal that there are opportunities at the right price. But it's also a reminder that cash is a position. Berkshire's been holding that cash for years, earning interest, and now they're choosing to put it to work. That's a vote of confidence in the long-term earnings power of American business. Luna: And the stock's reaction suggests investors agree. But let's talk about the buyback side — how much are they actually spending there? Lucas: In the latest quarter, they bought back roughly two billion dollars of their own stock. That's lower than some past quarters, but it's still meaningful. And with the stock up, they're getting less for their money, so it's not surprising they're being a bit more measured. Luna: Right, buybacks only work if you're buying below intrinsic value. If the stock runs up, that calculus changes. Lucas: Exactly. And that's the discipline. They're not going to overpay for their own shares just to make a statement. That's one of the reasons Berkshire's returns have been so consistent over the decades. Luna: So for someone building a concentrated portfolio, what's the takeaway here? Lucas: I'd say three things. One, cash is a legitimate position — don't feel like you have to be fully invested. Two, be patient and wait for the right opportunity, not just any opportunity. And three, when you have a high-conviction idea, don't be afraid to size it up. Luna: That's a solid framework. And it's interesting to see Greg Abel applying that same mindset in his first big test as CEO. Lucas: Yeah, he's got big shoes to fill, but so far he's showing he's got the same temperament. It's not about doing something dramatic — it's about doing the right thing consistently. Luna: And that's what made Buffett a legend. Let's hope Abel can carry that on. Lucas: Well, we'll be watching. And if you're thinking about your own portfolio, maybe take a page from Berkshire's book. Be patient, be selective, and let your winners run. Luna: Good advice. That's all for today's episode. We'll be back tomorrow with more insights for your stock-picking journey.