Billionaire investor Warren Buffett and his company Berkshire Hathaway spent almost $1 billion buying back its own shares in August, the company disclosed Monday after publishing its third quarter earnings on Saturday.
The company’s shares bounced almost 5 percent Monday, and the buyback “sends a really strong signal to the market” Edward D. Jones analyst Jim Shanahan said in an interview with CBNC.
Details from its filing show Berkshire was active buying other stocks between July and September as well. Net purchases of stocks through the first nine months of the year were $24.4 billion, nearly double the $11.8 billion net purchases reported through June. That means net purchases in the third quarter were about $12.5 billion.
Berkshire will report its third-quarter investment activities later this month, but the company has been a big buyer of Apple the past couple of years. By the end of June, Berkshire held 5.22 percent of Apple’s stock and was the second biggest holder.
The fair value of its investments as of Sept. 30 was $207 billion, up from $179 billion at the end of June and $170 billion as of the end of last year. Its portfolio is concentrated in five companies, including Apple, American Express, Bank of America, Coca-Cola and Wells Fargo. Apple is up nearly 20 percent this year, while the banks have lost ground. Wells Fargo is down nearly 11 percent.
Berkshire said it was prepared to buy back its own stock in July after loosening rules on buybacks because the company was sitting on $100 billion in cash and few opportunities to buy stocks at prices Buffett was willing to pay. So the next best option was to buy the company’s own stock.
“Better late than never,” said David Rolfe, the chief investment officer of St. Louis-based Wedgewood Partners, a long-time owner of Berkshire B shares. Now that Berkshire is willing to buy its own shares, it might be less tempted to make a big acquisition with its cash that doesn’t pan out, he said. “It speaks to me of a significantly derisked position,” Rolfe said.
“If Plan b is to buy back our own shares, shareholders should feel very comfortable.”