"What will Warren buy?"
That's the question at the forefront of many people's minds today after Berkshire Hathaway revealed a gigantic $116 billion cash hoard in its annual shareholder letter over the weekend.
It's not just an academic exercise, either. $116 billion is serious money, even in 2018, and when that kind of cash goes into play, it'll have very real implications for every investor.
Naturally, every financial writer on Earth rushed to write "Buffett Will Buy XXX, So You Should Too."
It's a tempting idea. It even tempted me for two seconds or so, until this occurred to me...
With a cash pile of over $116 billion, it makes no sense whatsoever for Buffett and No. 2 man Charlie Munger to buy anything for a penny less than $10 billion.
It just would not move the needle much at all. The not-inconsiderable hassle of filing the regulatory documents for such a deal would make it not worthwhile.
I think it will be much more interesting (and profitable) for us to think about Warren might do if Berkshire was not quite as large and he had a little more flexibility.
Looking at his published acquisition criteria, he likes... the same kinds of companies I do. Businesses that are consistently profitable, simple to understand and manage, with excellent management willing to stay in place.
I sat down and spent some time thinking about what the Oracle of Omaha would - not should - buy if the size made sense.
About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.