Right now, trillions of dollars sit on the sidelines. It’s being invested in short-term cash, which still earns a relatively high yield. But with interest rates starting to trend lower, cash will soon offer a less attractive yield.
Meanwhile, stocks are still near their all-time highs, but could see some volatility. It wouldn’t be surprising if some of that sidelined cash took advantage of market fears to invest in stronger long-term prospects.
One company with a massive cash hoard is Berkshire Hathaway (BRK-B). The conglomerate has $325 billion in cash, largely rolling over in short-term Treasury bills offering a relatively high return now.
In the most recent quarter, Berkshire sold of some stock positions and refrained from a share buyback to build that cash up even further.
Berkshire typically has a high level of cash, which is often used to buy great companies during a market selloff.
Action to take: While the market doesn’t like Berkshire’s particular move, the stock could be worth accumulating now.
While Berkshire famously doesn’t pay a dividend, the company’s long-term growth has more than made up for the lack of one over time.
For traders, the January 2025 $470 calls, last trading for about $5.15, could see mid-double-digit returns or better on a rebound from the post-earnings drop in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.