November 8, 2021

Buffett Spends Big To Buy Back Berkshire

 Warren Buffett had to spend more money to buy back shares of Bershire Hathaway Inc than to amass his largest equity investment in Apple Inc.

Berkshire has had to spend more than US $ 20 billion to repurchase its shares since mid -2018 compared to the value used in accumulating Apple's holdings until the end of last year.

Buffett has invested US $ 51 billion in repurchases since changes to his policy more than 3 years ago and has continued to earn at least US $ 1.7 billion since September.

Berkshire's chairman and CEO, Buffett has built Berkshire into a conglomerate worth more than US $ 650 billion having to bear the company's "elephant-sized" acquisition and his failure to hunt down his recent deal has left him increasingly reliant on buying back with more than US $ 20 billion as a way to put Berkshire’s cash record continues to function.

This is a big change for a CEO who previously avoided buybacks and preferred to spend money to buy shares of another company.

Everything changed in 2018 when the company’s board of directors lifted the buyback limit where it has given Buffett as well as his business partner Charlie Munger more flexibility in dividing profits.

According to Edward Jones analyst Jim Shanahan, all buyback activities, although large in size, are not enough to cut a portion of the conglomerate’s cash. Berkshire ended September with a record US $ 149.2 billion in funds in its coffers.

He added that the repurchase is good but the cash balance will increase again and the cash is now close to US $ 150 billion.

The Omaha, Nebraska -based business reported third -quarter earnings on Saturday of 18% operating profit supported by strong revenue and revenue from its energy business. It helps offset more losses on a group of insurers that have been hit by disasters like Ida Hurricane and more frequent claims from drivers at car insurance company Geico.

Berkshire also revealed that it bought back US $ 1.7 billion in stock from late September to October 27. Whitney Tilson of Empire Financial Research, who has attended Berkshire’s annual meeting for more than two decades praised the buyback but noted that she would still prefer to see Buffett eyeing the next profitable stock investment.