For years, we have read numerous articles and seen countless television commentators refer to Berkshire Hathaway’s “massive cash hoard” as if the company’s entire cash and fixed income balance (which is in the hundreds of billions) could be viewed as “dry powder” for potential acquisitions. This always struck a nerve with us, given our long history of analyzing insurance companies and their balance sheets.
Specifically, what this line of thinking fails to take into consideration is the fact that these balances largely back insurance reserves (liabilities for future claims payments). In fact, much of the time, as can be seen in the chart below, these balances have typically closely matched each other. This is likely no accident. It is our view that Mr. Buffett would want Berkshire to be very liquid in the event of a mega catastrophe, and not in a position of needing to sell equities to pay claims should one (or more) occur.
Indeed, one of the tenets we learned from the late Jack Byrne (our founder, John Gillespie’s, mentor and who Buffett famously dubbed “the Babe Ruth of insurance”) is this: Reserves are policyholders’ money and should be backed by cash and fixed income; investments in excess of reserves are shareholders’ money and should be invested more aggressively.
So, while some portion of Berkshire’s cash & fixed income could arguably be used for an acquisition, for many years, it wasn’t nearly as much as commentators would suggest.
Source: Berkshire Hathaway Annual Reports
All that said, as can also be seen in the chart, it can now (finally) be argued that Berkshire does, indeed, have a “massive cash hoard” which could be used for acquisitions (among other things) if Mr. Buffett so desires. We leave it to others to opine as to why that is, but the fact that Berkshire has sold billions of dollars from the equity portfolio recently, on top of their significant cash flow generation, has put the company in a position of having a buffer above insurance reserves which measures in the hundreds of billions.
That’s a lot of dry powder.
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Value Over Hype: Steve Labbe on Finding Opportunity Where Others Aren’t Looking

Long-term investment success isn’t achieved by chasing the latest trends. It requires a long-term view and a steady hand. In this interview, originally recorded in 2020, Portfolio Manager Steve Labbe discusses how prioritizing balance sheets, cash flows, and downside protection over market hype and headlines allow Prospector to find value where others aren’t looking. Listen in to learn more about this off-the-beaten path approach and the path that led Steve to Prospector.