Buffett defends holding large amounts of cash: I will always prefer to own good companies rather than cash

Berkshire's cash holdings exceed the total amount of U.S. stocks it holds, which is undoubtedly not exciting.

But Buffett reassured that although the "marketable securities" held by Berkshire decreased last year, shareholders can rest assured that the company's investment strategy will not change: most of the funds will be invested in stocks, primarily U.S. stocks.

Buffett wrote in his letter to shareholders:

Berkshire Hathaway will never place cash above "quality businesses."

While some commentators currently believe that Berkshire's cash reserves are unusually large, most of your funds are still invested in stocks, and this preference will not change.

Buffett added that although the stocks held by the company decreased last year, the value of its operating businesses increased—Berkshire operates multiple subsidiaries in industries such as railroads, utilities, and insurance.

Yesterday, Berkshire Hathaway announced its fourth-quarter financial report, with insurance profits soaring, driving operating profits up 71%. While continuing to reduce stock holdings, cash reserves reached a record $334.2 billion, nearly double that of the same period last year, accounting for 53% of the company's net assets. A year ago, Berkshire's funds in stocks were almost twice that of U.S. Treasuries.

Moreover, as of the fourth quarter of 2024, Berkshire has sold stocks for nine consecutive quarters. However, it is important to note that the U.S. stock market is currently at historical highs, with the S&P 500 index recently reaching new highs. According to reports, Buffett and his deputies are looking for investment opportunities.

Japanese stocks are one of its targets, and Berkshire is continuously increasing its holdings in Japanese stocks. In July 2019, Berkshire began purchasing shares of five Japanese trading companies: Itochu Corporation, Marubeni Corporation, Mitsui & Co., Mitsubishi Corporation, and Sumitomo Corporation. By the end of 2024, the market value of Berkshire's holdings in Japan had reached $23.5 billion.

A year ago, Buffett wrote that Berkshire held about 9% of each company and had informed each company that its stake would not exceed 9.9%. However, in his latest letter, Buffett wrote that Berkshire received permission from these companies to further increase its holdings:

“As we approach this limit, the five companies agreed to moderately relax the cap.”

Additionally, Buffett mentioned the reason why Berkshire does not pay dividends, with the exception of one instance in 1967. Buffett stated that he decided to reinvest Berkshire's funds rather than distribute dividends, which has yielded tremendous results—Berkshire's market value surpassed $1 trillion last year