Investors will be focused
Stock buyback activity, equity investment, book value and cash holdings for the third quarter when the company reports its earnings on Saturday, November 7.
Berkshire led its stock repurchase in the second quarter with a record quarterly buyback of $ 5.1 billion, higher in all of 2019. This pleased many Berkshire holders as the stock continued to hold the S&500 index and trades cheaply relative to book value versus history. .
Berkshire appeared to buy back its second stock of $ 2 billion in July, based on its second-quarter 10-Q basis. The annualized rate of about 4% of shares outstanding with Berkshire in the second quarter was approximately $ 490 billion. Some Berkshire holders would like to see an increase in buyback speed in the high second quarter.
Berkshire’s Class A shares (BRK.A) were up 1.3% to $ 306,375 on Monday, while the more liquid Class B stock (BRK.B) rose 1.2% to $ 204.31.
Edward Jones analyst James Sheenahan estimates that Berkshire’s book value rose to $ 265,000 per square A share, or about $ 177 per class B share, in the third quarter. This is up 8% from about $ 246,000 per Class A share in the second quarter.
This projected growth reflects approximately $ 30 billion of projected paper profits in Berkshire’s $ 207 billion equity portfolio, mostly reflecting advances in the third quarter of 27%.
(AAPL), Berkshire’s largest holding, is $ 105 billion. Unplanned and realized investment gains on Berkshire’s equity holdings flow into income and shareholder equity.
Berkshire is now 1.2 times lower than its estimate for the third quarter, 1.4 to 1.5 times over the past few years.
Berkshire’s Class A shares are down 10% so far this year on the back of a total 3% return on the S&P 500 index this year. Berkshire’s book likely dropped from September 30 due to a decline in the company’s stock holdings, most notably Apple, which is off about 6%. The book-price drop may be closer to 2%.
Berkshire further increased its investment activity in the third quarter after selling $ 10 billion in equity in the first half of 2020. It bought an additional $ 2 billion
Bank of america
(BAC) equity, brings its stake in more than 1 billion shares, and has agreed to buy natural gas pipeline assets
(D) for approximately $ 10 billion, including an equity contribution of approximately $ 4 billion. The company also said that it invested about $ 6 billion in five Japanese trading companies.
Berkshire sold nearly $ 2 billion
The stock (WFC) continued in the third quarter as CEO Warren Buffett once said Berkshire had the largest stake in financial stocks. Berkshire has a stake of around $ 3 billion, against about $ 24 billion for Bank of America.
Berkshire ended the second quarter with $ 146 billion in cash and the equivalent from $ 137 billion in the first quarter.
Buffett continues to search in vain for what he calls an elephant-sized acquisition that could total $ 50 billion or more and absorb a portion of that huge cash position. Buffett is price-conscious and competes with strategic corporate buyers and private-equity firms with hundreds of billions of dollars of non-equity capital or dry powder.
Wall Street will also focus on profit trends in key businesses such as the Burlington North Santa Fe Railroad, auto insurer Geico and the company’s vast wealth and casualty insurance operations.
According to FactSet, the company’s total earnings are expected to be lower, with an operating profit (excluding investment gains and losses) of $ 3,639 per Class A share with the company, according to FactSet. This marks a widespread profit decline in Berkshire’s economically sensitive industrial and other businesses.
Write Andrew Bury at [email protected]