According to the latest data on August 12, US Eastern time, Berkshire has spent about $70 on share buybacks in the past three months. In this view, Buffett believes that Berkshire’s stock price is still cheap and is willing to allocate a lot of assets for this.
according to Berkshire’s second quarter results, the company bought back about $5.1 billion of shares in May and June this year. In July, the company may have invested at least $2 billion in stocks again. As of July 30, the company had issued 1.59 million “a” shares, about 8500 shares less than the 1.6 million shares on June 30. Berkshire’s share buyback range to $2.5 billion may be due to the reduction of his share repurchase range to $2.3 billion, based on the assumption of Berkshire’s stock buyback team.
overall, from the beginning of May to the end of July, Berkshire may have spent $7.4 billion to $7.6 billion on Berkshire’s share buyback, breaking their highest share repurchase record in the previous three months.
Mr. Buffett’s decision to step up buyback shows that he has begun to actively use Berkshire’s $147 billion in cash reserves and take action in familiar areas. The company’s $10bn acquisition of most of dominion energy’s gas assets in early July and its decision to invest more than $2bn in Bank of America’s shares for 12 consecutive trading days in August proved so.
in response, bill Smead, chief investment officer of Smead capital management, told Sina Finance and economics that he agreed with Berkshire’s model of using cash reserves: “Berkshire thinks it sees the export of the new epidemic, so the company believes that its market price is still relatively cheap.”
according to Berkshire’s consistent practice, the company only repurchases shares when the share price falls below a conservative estimate of Berkshire’s intrinsic value. Berkshire’s share price has fallen about 7% this year, behind the 3% gain in the S & P 500. As of the end of June, the company’s market value was about 1.3 times its net worth of $397 billion, not far from what Mr. Buffett had previously described as “an attractive level of 1.2 times stock buyback.”.
at Berkshire’s annual shareholders’ meeting on May 2, Mr. Buffett was asked why he didn’t buy back more shares? He said the price had not yet fallen to “a level where we really feel more worthy of a big acquisition than anything else, including the option value of money.”.
David Kass, a professor of finance at the Robert Smith School of business at the University of Maryland, told sina finance that the question of stock repurchase was also drawn and answered by Mr. Buffett this year. Mr. Buffett further affirmed the importance of buying back shares. Mr. Buffett believes that the company should appropriately return the funds to shareholders by means of stock repurchase or cash dividends. But if they have invested in all the good things to invest in and have much more cash than they need, they should buy back the stock only if they think the price of the stock is below its intrinsic value.
some investors may be disappointed with the Omaha prophet’s inaction in the past few weeks and months. However, the current outbreak of the new outbreak of the United States economy is far from recovery. The S & P 500 may have recovered most of its lost ground, but many companies are still struggling. Berkshire’s $10 billion reduction in precision cast components also illustrates the problem.
Buffett wants Berkshire Hathaway to be a fortress, and it is. With $146 billion in cash on its balance sheet, the group has the ability to wait for a great deal like dominion. “Berkshire has strong financial strength to survive the worst, and its share price is cheap,” Smead said. Given Berkshire’s strong cash reserves, his stock buyback will continue. ”
this share buyback is the largest single quarter buyback ever made by Mr. Buffett, almost double the $2.2 billion buyback the group made in the last quarter of 2019. In fact, it’s a little more than what Mr. Buffett spent on buying back Berkshire’s shares throughout 2019. Despite a record buyback in the last quarter, Berkshire’s cash reserves rose to more than $140 billion. Berkshire A and B shares fell more than 19% in the first quarter and more than 1% in the second quarter, behind the S & P 500.
However, several companies in which the company invested heavily have all seen an upward trend since the outbreak of the new crown. Since March 23, Berkshire’s largest common stock, apple, has almost doubled. JPMorgan shares rose more than 27% over the same period, while Amazon shares rose more than 66%.