What Greg Abel Might Do With Berkshire Hathaway’s Massive Cash Pile
Obviously, nobody owns a functioning crystal ball. So, take any predictions about someone else’s future actions with a grain of salt. You can make educated guesses, however, based on a person’s past patterns and current situations.
With that as the backdrop, what is relatively new Berkshire Hathaway (BRKA +1.14%)(BRKB +0.83%) CEO Greg Abel apt to do with the $397 billion in liquidity he hasn’t yet used? Here are three pretty good bets.
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1. Repurchase more Berkshire stock
Previous Berkshire CEO and chief stock picker Warren Buffett wasn’t staunchly against stock repurchases; they did happen while he was at the helm. But they certainly weren’t always his preferred use of cash, even if that cash was going to sit idle for a while.
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Abel, however, seems to be more willing. In his first quarter as the conglomerate’s chief executive, he oversaw the repurchase of more than a couple of hundred million dollars’ worth of Berkshire stock, with estimates of a few billion dollars’ worth of stock buybacks materializing during the second quarter of this year. We won’t know for sure until the company’s official Q2 filings are submitted. Given how restless some shareholders have become, though, such a risk-free use of some of this liquidity would at least sate this crowd.
2. Growth and income are clearly converging in one corner of the tech industry
Greg Abel isn’t simply inflating the value of outstanding Berkshire Hathaway shares by taking some out of circulation, though. His ultimate goal is still investing for long-term growth.
To this end, although he’s unlikely to expand the existing stake in Alphabet (GOOG +0.24%) (GOOGL +0.58%) since the technology giant is now Berkshire’s fifth-biggest holding, this trade does suggest that Abel isn’t nearly as averse to owning tech stocks — with the exception of Apple — as Buffett generally was.
This doesn’t mean look for a new position in Nvidia to show up in the portfolio anytime soon. However, given their growth potential and reliable dividend income, it’s not inconceivable that an artificial intelligence data center REIT like Equinix (EQIX +4.90%) or Digital Realty Trust (DLR +10.70%) could become part of Berkshire’s mix.
3. Expand its energy business’s capacity
Finally, it’s an often-overlooked aspect of the company, but Berkshire Hathaway isn’t just a collection of individual hand-picked stocks. The conglomerate also owns many privately held companies, including power utility outfit Berkshire Hathaway Energy, which Abel previously ran.
That in and of itself wouldn’t normally mean much. Except at the annual shareholder meeting held in May, Abel specifically pointed out that Berkshire Hathaway Energy is already serving the fast-growing AI data center business, adding that he knows this demand could grow by 50% or more in just the next five years.
Were he not this energy arm’s former chief, he might not pursue it too aggressively. Given Abel’s familiarity with this particular business, don’t be surprised to see Berkshire Hathaway make capital investments specifically meant to bolster Berkshire Hathaway Energy’s position within this market.
Again, though, these are all just guesses, and far from guarantees.
James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Berkshire Hathaway, Digital Realty Trust, Equinix, and Nvidia. The Motley Fool has a disclosure policy.
