This Company’s $110 Billion Problem

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This Company has a $110 Billion Problem
Most companies are strapped for cash. If they can grow out of that problem, they will. If they can't they go under.

Established companies, however, tend to build cash reserves. They know that any one product they develop may be a dud. The tech companies tend to have even bigger reserves as a result too, particularly for large, established names.

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But one company, relative to its size, may have them all beat. That company is Berkshire Hathaway (BRK-A). With CEO Warren Buffett at the helm, the company has been building its cash reserves for a while now.

The issue is related to the company's size. For most investors, becoming a billionaire seems like an impossible dream. For Berkshire, making a billion-dollar acquisition would reduce cash holdings by less than 1 percent.

What is the company doing with this cash? From its latest earnings report and annual meeting, there are a few key takeaways. First, the company is still heavily invested in companies like Apple. And struggling positions like Kraft-Heinz, which Berkshire helped merge in 2013, will continue to be held for the time being. But for now, there's no sign of a new major acquisition.

But there are some new investments that investors should pay attention to, such as Amazon. While the stake is small, Buffett acknowledged the business's power in staying the biggest name in online retailing, giving it a value that might not appear in a traditional financial statement.

And with boatloads of cash, Berkshire is gradually buying back shares as well, which could make Berkshire shares appreciate even more in value. The company hasn't paid a dividend in more than 40 years, and the company's A shares have never split—and trade for over $300,000 as a result.

It's possible to see a $1 million share price in the coming years if the company continues to compound wealth near current levels. The company's more affordable B shares trade around $215.

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