Warren Buffett during an interview with CNBC’s Becky Quick on February 24, 2020. It turned out to be another year during which the billionaire investor avoided game-changing acquisitions in an expensive market even after a sudden market cash out and as his company it has a massive cash balance.
Gerald Miller | CNBC
As the coronavirus pandemic rocked the markets during 2020, Warren Buffett’s Berkshire Hathaway bought back a record number of shares in the company. And the buying spree has continued through 2021, according to the conglomerate’s annual letter released Saturday morning.
During the fourth quarter, the company repurchased about $ 9 billion of Berkshire shares, bringing the 2020 total buyback to a record $ 24.7 billion.
“Berkshire has bought back more shares since the end of the year and is likely to reduce its share count further in the future,” its annual letter read.
During the third quarter, the conglomerate bought back $ 9 billion of its own shares, up from $ 5.1 billion during the second quarter. The figures compare to the total of $ 5 billion the company spent on buybacks in 2019.
Buffett emphasized that the company only participates in share buyback programs when it believes the shares are trading below their intrinsic value.
“By no means do we think Berkshire shares should simply be bought back at any price,” Buffett said in the annual letter. “I emphasize that point because American CEOs have a shameful history of dedicating more company funds to buybacks when prices have risen than when they have sunk. Our approach is the exact opposite.”
Berkshire’s operating income, which Buffett urges shareholders to focus on, amounted to $ 5.02 billion during the fourth quarter, up from $ 4.42 billion during the same period last year. For the full year, operating profit fell 9% to $ 21.922 billion when the pandemic hit the Berkshire business conglomerate.
The company’s net profit, which represents Berkshire’s large investments in the public market, increased 23% year-over-year to $ 35.835 billion. However, for the full year, net earnings slid 48% to $ 42.521 billion.
Berkshire Hathaway’s Class A shares hit a new all-time high on Thursday, after bouncing 52% from the March 23 low. For the year, the stock was up about 5%, topping the 2% gain of the S&P 500.
Even after Berkshire’s record buyback in 2020, the company still has a hefty cash pile of $ 138 billion. The figure is less than the $ 145.7 billion at the end of the third quarter.
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