The Most Underappreciated Engine Inside Berkshire Hathaway Isn't the Cash Pile

Anyone who owns a stake in Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) may be more than a little frustrated that the company seemingly isn't doing anything with its idle cash. As of the latest look, it's got $397.4 billion on the sidelines, versus only $328 billion in stock holdings, at a time when the market is roaring.

Like predecessor Warren Buffett, though, current Berkshire CEO Greg Abel understands something many investors may not: This conglomerate's structure isn't what it seems on the surface. Its equity investments aren't necessarily the only growth engine.

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Not quite what you think it is

You likely know Berkshire Hathaway as a pseudo-mutual fund that also owns a bunch of privately held businesses, including Fruit of the Loom, Duracell batteries, Pilot travel centers, GEICO insurance, flooring company Shaw, and more.

That's never quite been what Berkshire Hathaway is, however. First and foremost, it's an insurer, and a brilliantly run one at that. As Buffett himself wrote in 2009's shareholder letter:

Insurers receive premiums upfront and pay claims later... This collect-now, pay-later model leaves us holding large sums -- money we call "float" -- that will eventually go to others. Meanwhile, we get to invest this float for Berkshire's benefit. Though individual policies and claims come and go, the amount of float we hold remains remarkably stable in relation to premium volume. Consequently, as our [insurance] business grows, so does our float.

And its float has most definitely grown, from $39 million in 1970 to $27.9 billion in 2000 to $176 billion as of last year. That's an annualized growth rate of 16.5%, outpacing the S&P 500's average annual return during this stretch.

That's also roughly in line with Berkshire Hathaway's share price gains for most of its existence, by the way, suggesting that its growing insurance business is a major contributor to its net shareholder returns. It's also been a more consistent contributor than the company's individual stock holdings.

And make no mistake -- Abel looks at this business just like Buffett did. As he plainly stated in his 2025 shareholder letter published early in 2026, Berkshire's insurance float is indeed "the capital we hold to pay future losses and, in the meantime, invest for Berkshire's benefit."

Still creating value

Abel undoubtedly needs to do something constructive with all that idle cash sooner or later. And he will.

He doesn't necessarily need to rush it, however, to provide current shareholders with a reasonable amount of growing value right now. They're getting it, even if it's not readily evident, and even if the company's cash pile has grown annoyingly large.

For what it's worth, though, there's some movement on this front -- just not quite the kind most investors may have been expecting. Rather than buying and holding a bunch of new individual stocks, following January's acquisition of Occidental Petroleum's chemical arm OxyChem, late last month, Berkshire announced it will be wholly acquiring homebuilder Taylor Morrison Home. As privately owned holdings, these businesses will contribute cash flow rather than capital gains to Berkshire's bottom line, which, of course, will add to already record-breaking operating profits ... and the company's ever-growing float.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.