🔒 Berkshire Hathaway spent $12.6bn on stock buybacks — with insight from The Wall Street Journal

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In a Deal Desert, Warren Buffett’s Berkshire Hathaway Keeps Buying Itself

Analysts expect the Omaha conglomerate’s stock repurchases to hold steady in the third quarter

Updated Nov. 4, 2021 10:44 am ET

Warren Buffett’s Berkshire Hathaway Inc. BRK.B -0.36% didn’t pull the trigger on any major acquisitions this past quarter—unless you count the company’s own shares.

Berkshire spent $12.6 billion on stock buybacks during the first six months of 2021. And because its shares may still trade below the company’s intrinsic value—as defined by Mr. Buffett—it is a safe bet Berkshire’s repurchases kept that pace in the third quarter, analysts said. In the first few weeks of July, buybacks totaled about $1.75 billion, said James Shanahan, an analyst with Edward Jones.

The market’s enduring rally, private-equity deal makers and an abundance of special-purpose acquisition companies have driven up many would-be acquisition targets to record prices. The SPACs, which have a limited time in which to deploy investors’ money, have in particular drawn fire from both Mr. Buffett and his longtime business partner, Charlie Munger, for their role in pushing valuations higher.

“Frankly, we’re not competitive with that,” Mr. Buffett, Berkshire’s chairman and chief executive, said during the company’s annual shareholder meeting in May. “It won’t go on forever.”

Those conditions, though, did continue during the third quarter. The S&P 500 index may have slid by 4.8% in September, its worst month since March 2020, but the benchmark still eked out its sixth-straight quarter of gains. Meanwhile, Berkshire’s stockpile of cash and cash equivalents has hovered around $140 billion for the past year. The figure stood at $144 billion at the end of the second quarter.

“It’s really difficult,” said Cathy Seifert, an analyst with CFRA Research. “The phone calls Berkshire would have gotten 20 years ago—they’re just not getting.”

Ms. Seifert said Berkshire may eventually find bargains in consumer-staples and industrials, two industries whose shares have underperformed the market this year.

Mr. Buffett defended the use of stock buybacks during the annual meeting, arguing they can benefit both investors eager to sell their shares as well as those who intend to own Berkshire “till they die.”

“They’re a way, essentially, of distributing cash to the people that want the cash when other co-owners want you to reinvest, and it’s a saving vehicle,” he said.

If, say, one of four owners of a business wants that cash, “there’s only two ways to do it,” he explained. “We can pay dividends to all four of us, three of us of whom don’t want to do it, and we can repurchase the shares at a fair price.

“We’ve got a very substantial majority of people that want us to reinvest the money, and what they’re more concerned about is whether we find something to do with the money, the $100 billion or something,” he said. “They’d love to see us buy another business, but they don’t mind us intensifying their interest in the present business.”

Berkshire’s Class A shares have risen 25% so far this year. They closed Wednesday at $435,020. The S&P 500 is up 24% in the same period.

Berkshire is slated to report its quarterly results early Saturday.

Analysts expect the conglomerate to earn $4,493.33 per Class A share, up from $3,224.74 a share in the same period a year ago, according to S&P Global Intelligence. Analysts’ average estimate for earnings per Class B share, which is included in the S&P 500, is $2.93.

Berkshire should report strong results from its large railroad and energy businesses, said Macrae Sykes, a portfolio manager at Gabelli Funds. And among Berkshire’s smaller holdings, home builder Clayton Homes, Berkshire Hathaway Automotive and NetJets Inc. may have had standout quarters, Mr. Sykes said.

The company’s sprawling insurance operations should benefit from the strengthening economy, offset somewhat by losses from this year’s hurricane season, he said.

Last month, Berkshire added Susan Buffett and Christopher Davis to its board. Ms. Buffett, the daughter of Berkshire’s chairman, runs two private Omaha-based foundations. Mr. Davis leads Davis Select Advisors, a money manager with $25 billion in assets. The additions expanded the Berkshire board to 15 members.

Walter Scott, a longtime Berkshire Hathaway director and business partner to Mr. Buffett, died in September at the age of 90.

Write to Justin Baer at [email protected]

Corrections & Amplifications
An earlier version of this article incorrectly stated Berkshire’s stockpile of cash in millions. The cash and cash equivalents hovered around $140 billion for the past year. (Corrected on Nov. 4, 2021)

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Appeared in the November 5, 2021, print edition as ‘Berkshire Eschews Deals for Buybacks.’

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