Warren Buffett’s Berkshire Hathaway is climbing after announcing a $111 billion cash pile that's fuelling speculation over its next big investment

Bill Pugliano/Getty ImagesWarren Buffett.

Shares of Berkshire Hathaway – the conglomerate run by billionaire investor Warren Buffett – were up more than 2% in early trading Monday after the company reported a jump in quarterly profits and a $US111.1 billion cash pile over the weekend.

Berkshire’s profits rose 67% for the second quarter, which ended in June, fuelled by a healthy economy that helped its insurance units, railroads, and automotive-financing arms.

The Omaha, Nebraska-based company also said it’s sitting on a $US111.1 billion nest egg of cash and cash equivalents, giving speculators ample fodder to theorise over Buffett’s next investment. Berkshire in July loosened its policy on share buybacks, which it says will be repurchased when their value is “below Berkshire’s intrinsic value,” Chairman Charlie Munger said.

Stock buybacks are more likely in the near term, one analyst said Monday, as equity valuations remain too stretched for a conservative investor like Buffett to make a move. The CEO said in his most recent shareholder letter that he was having difficulty finding good acquisitions at sensible prices.

“They seem to be patiently building up their cash pile, waiting for what they feel are more sensible prices and it is easy to understand why,” said Russ Mould, an investment director at AJ Bell, which manages around £42 billion ($US54.29 billion) said in an email.

“M&A tends to peak when animal spirits are running high and often when executives feel their own shares are expensive enough to make them a valuable acquisition currency … it is noticeable how Berkshire Hathaway’s cash pile grew in 1998-1999, just ahead of the 2000 tech bubble and stock market bust, and again in 2005 to 2007, as markets again became frothy.”

Buffett has not made a big acquisition since January 2016 when Berkshire paid $US32.1 billion for the aircraft-parts manufacturer Precision Castparts. Prior to that, he made headlines with his purchase of truck-stop chain Pilot Flying J in the fall of 2017

Berkshire’s stock price is up 3.88% since the beginning of the year, slightly lagging the S&P 500’s benchmark 5.4% gain in the same period.

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