Summary:
Berkshire Hathaway has been sitting on $397 billion in cash.
Warren Buffett barely touched it for years, citing a lack of attractive deals. His successor just spent $6.8 billion of it on a homebuilder - and broke one of Buffett's oldest rules doing it.
Greg Abel, who took the top job from Buffett in January, announced the deal for Taylor Morrison yesterday. It's the biggest move he's made since stepping in.
Taylor Morrison is one of the largest homebuilders in the US, with more than 350 communities across 12 states. It also runs a side business in home loans, title work, escrow, and insurance.
The price tag works out to 1.16 times Taylor Morrison's projected 2026 tangible book value - meaning the company's stuff (land, homes, equipment) minus its debts. That's cheap next to other homebuilders.
The deal also lands at a low point for the sector, with mortgage rates at their highest level since August and homebuilder stocks sliding.
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For decades, Buffett let new acquisitions run as standalone companies inside Berkshire, rarely stepping in. [NEEDS MANUAL VERIFICATION: the source does not include the specific joke that Buffett didn't know the names of some CEOs reporting to him; the broader hands-off stance is accurate but this exact anecdote isn't in the source.]
Abel is doing it differently. Taylor Morrison will get folded directly into Berkshire's existing operations, sitting alongside Clayton Homes, the affordable housing builder Berkshire already owns.
Bloomberg analysts called it a barbell - Clayton serves lower and middle-income buyers, while Taylor Morrison serves the high end. Two ends of the housing market, both under one roof.
Buffett's reaction said plenty: "Greg did that faster than I could have done it, smoother than I could have done it, and I never talked to the CEO. He has launched."
Investors have been waiting for a move like this. The frustration showed: Berkshire shares were down 5.6% on the year heading into the deal, trailing the S&P 500's near 11% gain.
The cash pile keeps climbing too - $397 billion at the end of the first quarter, the most Berkshire has ever held.
That leaves room for more deals, especially in housing - a sector that pays off most when mortgage rates come back down.
Where the Fed takes rates next will shape how aggressive Abel gets from here.
Buffett spent years waiting for the right pitch. Abel just took a swing.
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