Do You Hold More Cash Than Warren Buffett?

http://seekingalpha.com/article/892681-do-you-hold-more-cash-than-warren-buffett?source=yahoo

The following table outlines the level of cash on Berkshire's consolidated balance sheet compared to other assets:

Quarter Ending 6/12 (in billions): Cash: $ 40.7; Long-term Investments: $135.4; Total Assets: $411.3

Year Ending 12/11 (in billions): Cash: $ 37.2; Long-term Investments: $125.1; Total Assets: $392.6

Year Ending 12/10 (in billions): Cash: $ 38.2; Long-term Investments: $117.4; Total Assets: $372.2

Year Ending 12/09 (in billions): Cash: $ 30.5; Long-term Investments: $126.3; Total Assets: $297.1

Source: Yahoo Finance

From the table above, the amount of cash compared to the company's investment portfolio (calculated as l-t investments + cash) fluctuated between 19% and 23%, while the amount of cash compared to total assets has maintained a 9% to 10% range.

Where does Berkshire invest its cash? According to the 2011 Annual Report, cash equivalents consist of funds invested in U.S. Treasury Bills, money market accounts, demand deposits and other investments with a maturity of three months or less when purchased.

Most investors use a plain vanilla money market fund to store cash. Prior to the financial meltdown of 2008, money market funds were considered a "safe" investment where $1.00 invested would be worth $1.00 in perpetuity. But, during the meltdown, a money market provider "broke the buck" and the NAV was worth less than $1.00, creating a loss of capital if investors were to sell. On Sept 17, 2008, the Primary Fund, one of the originators of the money market fund concept, announced a freeze on all distributions for up to 7-days as its NAV fell below $1.00 with the write-down of Lehman Bros debt assets to zero. The first case of a money market fund breaking the buck occurred in 1994, when Community Bankers U.S. Government Money Market Fund was liquidated at $0.94 cents because of large losses in derivatives.

From the recent Globe and Mail article about Buffett's cash holdings (I highlighted the last paragraph as meaningful for those who use money or fund managers):

"The option theory of cash is something Mr. Buffett does not tend to get into when he is up on stage at his annual investor meeting, dishing out his homespun take on life and investing. That's probably because Mr. Buffett views himself as a teacher, and he wants to reach a broad audience", Ms. Schroeder says.

"Generally speaking, he likes to keep concepts simple," Ms. Schroeder says. "He says, 'I like to have all that cash around because you can use it.'"

However, it is a lesson that Ms. Schroeder said she wishes more people would learn. For many investors, there is a sense that holding cash is a cop-out. Investors who see their fund managers holding a lot of cash tend to think that they are not getting their money's worth, which is wrong, she says.

"If investors would realize that what they are paying for is someone to have the expertise to know when to buy a call option called cash, and move in and out of that, then perhaps there might be more value placed on that service."

The question remains: do you have more cash than Buffett as a percentage of assets? Using a Broad Asset Diversification Model, cash is given its rightful place next to the other asset classes for all portfolio analysis.

While the percentage of cash should vary based on an individual's risk profile and investment goals, Berkshire holds sufficient cash to achieve the goal of being able to meaningfully capitalize on potential value-priced opportunities.

Do you?