Berkshire Hathaway (BRK) earnings Q3 2020

Warren Buffett

Gerard Miller | Cnbc

As coronavirus virus accounts for its operating income and stock price, Berkshire Hathaway extended its stock repurchase program even further in the third quarter, doubling the record buyback in the second quarter.

Warren Buffett’s group bought back $ 9 billion in its own stock, it was revealed in its third-quarter earnings report on Saturday. This is larger than the $ 5.1 billion level during the second quarter that turned heads when it was announced and Berkshire’s total buyback for 2020 was $ 15.7 billion.

Berkshire repurchased over $ 2.5 billion in Class A shares and approximately $ 6.7 billion in Class B stock during the quarter. It blew UBS’s estimate of a total quarterly buyback of only $ 3.2 billion.

Buffett’s repurchase phase comes amid difficult times amid the global economy’s struggle to overcome coronavirus, which directly impacts the company’s wholly owned businesses, including railroads, utilities and insurance.

Berkshire said it had operating income of $ 5.478 billion, up 30% from the year-ago period. But the company’s net earnings – one of Berkshire’s large investments in the public market such as Apple – are up more than 82% on an annualized basis of $ 30.137 billion.

Apple, Berkshire’s largest stock holding, stayed more than 26% in the third quarter. Coca-Cola gained 10.5% over that time period. However Buffett has cautioned investors not to ignore those net earnings as the investment gains are unrealistic and volatile.

Does Buffett find stocks cheaper?

In his annual letter released earlier this year, Buffett discussed when he and Berkshire Vice Chairman Charlie Munger would decide to repurchase shares.

“Our thinking, boiled down: Berkshire will buy back its stock only when a) Charlie and I believe it is selling at a lower price and b) the company, upon completing the repurchase, is left with sufficient cash. Is, “Buffett wrote. “Over time, we want Berkshire’s share count to go down. If the price-to-price rebate (as we anticipate it) widens, we’ll likely be more aggressive in purchasing shares. . However, we will not promote the stock at any time. Level. “

Buffett defended the practice as usual at the Berkshire Annual Meeting in May.

“When the conditions are right, repurchasing the shares should also be clear and by no means a slight reduction compared to the dividend,” he said.

Despite Berkshire Hathaway’s Class A shares returning nearly 20% in the third quarter, the stock has been outperforming the S&P 500 this year. The stock declined 8% compared to the total 10% return for the S&P 500.

Buffett’s buyback spree comes as Oracle of Omaha has made relatively few major moves this year. In late August, Buffett announced that Berkshire had taken a stake of at least 5% among Japan’s five major trading companies: Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co., and Sumitomo Corp. But the company has not made any announcement. Other major acquisitions this year.

Even after record purchases this year, Berkshire’s cash pile at the end of the third quarter stands at $ 145.7 billion.

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