By
Godfrey Benjamin
April 17th, 2024
Berkshire Hathaway bought more stocks and ramped up share buybacks in the third quarter.
In Q3 earnings report released by Berkshire Hathaway Inc (NYSE: BRK.A) on Saturday, Warren Buffett‘s conglomerate repurchased $9 billion of its own stock. Compared to the record figure that amazed many of $5.1 billion in the second quarter, Berkshire has nearly doubled the amount of buying its stocks during the third quarter. Now the total buybacks during 2020 amount to $15.7 billion.
UBS had estimated a total quarterly buyback of $3.2, however, it was surpassed since the company repurchased Class A shares worth over $2.5 billion and Class B worth almost $6.7 billion. Buffett chose to repurchase at a tough time when coronavirus had impacted the company’s insurance, utilities, and railroad businesses.
Cash Pile of Berkshire Hathaway Stands Still in Q3
Besides owning companies such as Burlington Northern railroad, See’s Candies and Geico, Buffett’s company has invested billion-dollar in public companies like Coca-Cola Company (NYSE: KO), Bank of America Corporation (NYSE: BAC) and Apple Inc (NASDAQ: AAPL). During the third quarter, Berkshire’s biggest stock holding Apple rallied over 26% while Coca-Cola achieved 10.5% higher than the tech firm. On a year-over-year basis, Berkshire’s net earnings from its big investments in the public market skyrocketed to $30.137 billion, an over 82% increase.
Buffett was quick to caution investors not to peg their hopes in net earnings due to the unrealized and volatile nature of investing gains. The caution might be wise since Berkshire’s operating earnings of $5.478 billion were over 30% down from the figure in the same period last year.
Berkshire stock has, for a large part of this year, widely underperforming the S&P 500 but has surpassed the 8.5% gain in the index to climb almost 20% in the third quarter. However, Class A shares fell 7.6% in comparison with the S&P 500 total return of 10%. Though shares climbed through the quarter, the company decided to increase its repurchases.
Berkshire’s cash pile in the third quarter has stood still at $145.7 billion even after experiencing record buybacks throughout this year. Accumulation of the funds is taking place much faster than Buffett can manage to invest in higher-returning assets.
Buffett Now Appreciates Buybacks More
During the annual meeting in May, Buffett told Berkshire shareholders that repurchasing shares wasn’t a fruitful venture now than before the pandemic when stocks were much higher. However, just months after, Buffett is more optimistic about the conglomerate’s prospects following the heightened buybacks. He seems to have disposed of his long-held aversion to share buybacks.
Earlier this year, Buffett revealed in his annual letter that he had discussed with Charlie Munger, Berkshire Vice Chairman, about the decision to repurchase stock.
“Our thinking, boiled down: Berkshire will buy back its stock only if a) Charlie and I believe that it is selling for less than it is worth and b) the company, upon completing the repurchase, is left with ample cash,” Buffett wrote.
In a move to supercharge his conglomerate’s growth, Buffett, 90, has over the years struggled in his quest to get attractive deals that would enable him to deploy his cash pile into higher-returning assets. Besides the repurchases in the quarter, the bona fides dealmaker’s other capital-deployment maneuvers takeover of Dominion Energy’s natural gas transmission, a bet on Snowflake Inc (NYSE: SNOW) as well as a $6 billion investment in Japanese trading houses.