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business/news//Reuters
Berkshire agreed on Monday to buy $10 billion of stock in Google's parent Alphabet in a private placement.
Berkshire Hathaway invested $10 billion in Alphabet as part of an $80 billion private placement.
KEY POINTS
This marks a strategic shift from Warren Buffett's previous hesitancy to invest heavily in tech stocks.
Berkshire also announced a $6.8 billion acquisition of homebuilder Taylor Morrison to expand in housing.
Berkshire's new investments signal Greg Abel's effort to deploy the firm's significant cash reserves.
The investments may begin satisfying investors who have clamored for Abel, who succeeded Warren Buffett as chief executive in January, to do what his predecessor did not: spend more of Berkshire's cash.
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Many investors and analysts have said Berkshire's cash, which totaled $380.2 billion as of March 31, has weighed on the Omaha, Nebraska-based conglomerate's share price.
"Everyone has been waiting for Greg to do his thing, beyond Warren Buffett's shadow, and we're now seeing that," said Steven Check, president of Check Capital Management in Costa Mesa, California, which invests $2.4 billion including more than $700 million in Berkshire stock and options. "It's encouraging."
BERKSHIRE ADDS $10 BILLION TO ALPHABET STAKE
Berkshire agreed on Monday to buy $10 billion of stock in Google's parent Alphabet in a private placement, as part of an $80 billion equity fundraising by the Mountain View, California-based company.
The investment signals Berkshire's confidence in Alphabet's leadership in AI.
That bet marks a reversal from Buffett's hesitancy to invest in technology companies. He viewed Apple as a bet on the consumer.
At Berkshire's annual shareholder meeting in 2019, Buffett and late Vice Chairman Charlie Munger lamented not investing in Google sooner, with Buffett saying Google's advertising model resembled what was working for Berkshire's Geico car insurance unit.
"We screwed up," Munger said.
"He's saying we blew it," Buffett responded. Buffett remains Berkshire's chairman.
BERKSHIRE ADDS HOMEBUILDING CAPACITY
The $6.8 billion acquisition of Taylor Morrison, which operates in 12 U.S. states, was announced on Sunday.
It would help Berkshire expand its commitment to the housing industry, which also includes the Clayton Homes manufactured housing business, as well as sellers of bricks, paint and insulation. Berkshire also runs one of the largest U.S. residential real estate brokerages.
While Berkshire has pledged to keep a $30 billion cash cushion, investors have said it could consider buying back more of its stock, or instituting its first dividend since 1967.
Berkshire did not immediately respond to a request for comment on Alphabet, and declined additional comment on Taylor Morrison.
The conglomerate's dozens of operating businesses are sometimes considered a microcosm of the American economy.
They include the BNSF railroad, an array of energy and industrial companies, and retail businesses such as Dairy Queen, Fruit of the Loom and See's Candies.
Reporting by Jonathan Stempel in New York; Editing by Lincoln Feast.