NEW YORK (
TheStreet) -- As
(BRK.A) earnings recover from the financial crisis, the investment conglomerate's founder
Warren Buffett increasingly faces the challenge of where to plow his cash hoard to generate investment returns.
From large stock buys such as a $10.7 billion purchase of
(IBM) shares last year to mega deals like the $26.3 billion takeover of railroad
Burlington Northern Santa Fe in 2009, Buffett's "elephant gun" is the most talked about financial firearm in the markets.
The latest results from Berkshire released last Friday reported cash up from $37 billion to $40 billion at the end of the second quarter. Additionally, the fact that Berkshire sold $3 billion worth of stock in the second quarter gave Buffett watchers just enough information to make the suggestion that he could be selling stock in plans to finance a major transaction.
speculated earlier this year -- after Berkshire's annual meeting -- that
(MOS) fit within Warren Buffett's stated M&A parameters.
Meanwhile, others wonder whether a string of minor-sized
will preempt a larger deal for the
New York Times Company
-- which Buffett increased his stake in recently -- turning Buffett into a print media mogul.
At this time last year, Berkshire's cash swelled to $47.9 billion only to fall back below $40 billion after it plowed over $9 billion in cash to buy chemicals giant
in early 2011.
Meanwhile, after posting
strong earnings growth
from most businesses in the second quarter, Berkshire may need a next big investment idea to make use of recovering earnings at some housing-related units and growing revenue in new operations like Burlington Northern and Lubrizol.
For instance, Burlington Northern revenue climbed from nearly 7% to $5.1 billion in the quarter, and its earnings were higher by $110 million versus the year-ago quarter.
Berkshire's manufacturing, retail and services business saw across the board increases in revenue versus the prior year. Housing related earnings from Acme Building Brands, Benjamin Moore (paint), Johns Manville (insulation), Shaw (carpets) and MiTek (roofing) were also part of a manufacturing group that saw revenue increase 35% and earnings go higher by 56% versus the year ago period.
In light of the improving Berkshire earnings and the massive cash hoard, here's a look at some unconventional deals that Berkshire could target in coming quarters, as its cash swells to what could be uncomfortable levels.
Check Out Our Best Services for Investors
Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts