Warren Buffett is called the Oracle of Omaha for good reason.
Atop his phenomenal investing success, the 93-year-old CEO of Berkshire Hathaway (NYSE: BRK.A) is well known for sharing his market acumen with eager disciples across the world.
Among the investing nuggets he's shared over the years is this one, "Hold cash for emergencies, then plan to spend the rest on smart investments."
Choosing the right smart investments, according to Buffett, also means investors should, "Avoid anything that will not increase your purchasing power over time."
It's advice like this that's helped Warren Buffett deliver remarkable outperformance for Berkshire over the years, with the company's class A shares generating a compound annual gain of 20.1% between 1965 and 2021.
It's also helped him amass a personal fortune of roughly AU$173 billion.
So, why is Berkshire sitting on a record US$157.2 billion (AU$241 billion) in cash?
Warren Buffett has plenty of dry powder
With that much cash on the sidelines, the Oracle of Omaha certainly is keeping plenty of powder dry to deploy on profitable investments.
But with the cash pile at all-time highs, Jim Shanahan, an analyst with Edward Jones, believes this could see Berkshire face calls from shareholders to find those profitable deals.
"Cash deployment is definitely slowing," Shanahan said (as quoted by Bloomberg) "Ultimately Berkshire's going to start feeling some pressure to put cash to work."
But it's unlikely Warren Buffett will feel pressured into doing anything rash.
Berkshire's record cash pile, after all, comes at a time of soaring interest rates.
Those higher rates, alongside gains from the company's insurance businesses, helped boost Berkshire's operating earnings year on year to US$10.8 billion.
Atop the improved returns on the cash pile, KBW analyst Meyer Shields said elevated valuations could be holding Berkshire back from engaging in some of the big-ticket deals the company is well-known for.
Shields said that until market valuations match up with the higher interest rates on offer, "the right thing to do is to do nothing".
Indeed, that's right in line with another Warren Buffett investing pearl, "Never overpay for anything."