By: Sergei Klebnikov
Topline: Billionaire investor Warren Buffett’s latest dealmaking efforts suggest that the stock market is overvalued (as noted in this CNBC analysis), as the Oracle of Omaha recently lost to a private equity firm in his latest takeover bid—despite having a record $128 billion in cash on the sidelines, which he is finding increasingly difficult to spend on acquisitions.
- Buffett’s Berkshire Hathaway recently offered $5 billion to buy technology distributor Tech Data Corp. but was outbid by private equity firm Apollo Global Management, which put up around $6 billion, according to CNBC.
- Tech Data brings products to market for companies like Apple, which is Berkshire’s largest investment, with a roughly $56 billion stake.
- Despite having a record $128 billion in cash to burn, the notoriously frugal Buffett bowed out of the deal, raising questions that the overall market might be overvalued.
- With the stock market hitting all-time highs in 2019, Buffett has repeatedly lamented that the premium for buying businesses outright has gotten too high—in part due to competition from private-equity firms like Apollo.
- Berkshire has subsequently struggled to make new acquisitions and spend its growing cash pile in recent years, with Buffett viewing bidding wars as a waste of time and money.
- In his most recent annual letter to shareholders, the Berkshire Hathaway chairman admitted that “prices are sky-high for businesses possessing decent long-term prospects.”
Big numbers: Berkshire Hathaway shares are lagging the broader S&P 500 index by more than 15% this year. The stock is on track for its worst underperformance since 2009, according to Bloomberg.