Today berkshire announced they have resumed the buyback and separately the CEO announced he bought $15m (his annual salary after tax) worth of berkshire shares. Instead of buying the shares, I have entered a call spread for buying $400 call and selling $500 calls both Jan 27 expiration for $74.19. Thus my net price would be $74.19, about 5% less than the current market price; and if the calls were exercised I will make 34.79% simple, or 39.93% annualized return;
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On another account, which is little more conservative, where I did $400 ~ $450 call spread for net $41.18, which is 11% below the current market price, which will give 21.42% return or 24.58% annualized.
Greg in his interview with Becky touched on dividend. So for now the first option to return cash is buyback and at some point dividend is how I read it. Of course that is not what exactly Greg said. My view for few years is, Berkshire should do aggressive buyback and at some point establish dividend. I am glad to see the buybacks resumed. I expect that it will be on-going, in fact, that expectation is the central reason I did the spreads with so little downside protection.
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Berky did a grand total of $235 M of buyback. They are too busy selling equities, and their purchases (from 13F) are bit head-scratching.
It seems Berkshire really has no clue what to do with the cash they are generating. At this point, it is pretty clear the cash pile they have is bigger than any potential acquisition(s), and expecting the cash will be deployed on a âmythicalâ market downturn is just a dream. The language of value for buyback is utterly laughable. Berkshire has to start buyback in earned and start dividend too. At what point they will do it?
The stock is under performing the index for a pretty big stretch of time. The old timers argument of Berkshire outperforms in full cycle is hollow.
It will be sad, if WEBâs legacy in the end is he never wanted to share the spoils of the company with his shareholders.
I had purchased a 430/460 spread that I sold at nearly full value about a week ago. Separately, I also sold a 460 put, and it expired worthless over the weekend.
I donât think they are waiting for market downturn. Instead I think they are waiting for a good deal to appear. It makes no sense buying something that has a 60% probability of dropping and only a 40% probability of increasing enough to be worth buying. Better to remain in 3.6% T-bills than to suffer a 15% drop, the former at least barely keeps up with inflation, while the latter is nearly -20% after inflation.
I want to see a strong buyback but I do not want to see a dividend. Ever! I want to choose when I realize income, I do not want someone else to choose when I have to realize income.
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All along Berkshire bulls argued the cash hoarding is waiting for downturn, now you can talk about a good deal. What is a good deal for Berkshire is a mystery. Frankly, the operating companies performance is poor, they are masked by insurance gains. Everyone was like what a great operator Greg is, and all I am seeing is the operating companies when benchmarked to the peers, the performance is stunningly poor.
They have so much cash, any opportunity arises they can easily take care of it, and if required they can even borrow. Return the cash to shareholders.
Sort of a dream like 2008, 2022, 2000? Those kinds of mythical downturns where Berkshire deployed tons of cash? Or in the late 90âs when everybody was yelling for Warren to buy buy buy because âthe market only goes upâ?
By almost any conventional measure, the market is overvalued, in many cases severely overvalued. And we are in the grip of a mania, where multiple hundreds of billions are being invested in AI, for which a future financial case has not (yet) materialized. I find it almost sure, indeed prudent, to hold cash - so long as it is not withering to inflation - and that âproblemâ can be dealt with through adroit money management.
The oil imbroglio currently enveloping the world is only one possible trigger for a slowdown, at which time the cash will be a golden asset, not something to be chuffed about.
Relax. Donât worry. Be happy. Those guys have gotten in right far more often than wrong.
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Let us be realistic. I am not sure Berkshire actively deployed cash in all those instances. In 2008, investors offered unbelievable terms to Berkshire, proddled by US government. If my memory serves me, in 2022 Berkshire didnât take advantage of any tech sell-off rather they invested heavily at the beginning of the year. It is a myth that Berkshire deploys cash on market downturn. The data clearly disproves that theory.
Index is overvalued, because of tech sector weighting. There are many sectors where the valuation is attractive. Clearly, anyone looking for capital are not knocking the doors of Berkshire and Berkshire is not finding any opportunities either. Even in areas like electricity grid, utility where they have scale and expertise, they are not able to find anything to invest/ deploy cash.
Capital allocation is Berkshireâs biggest challenge or risk. If Berkshire is hoarding all this cash waiting for some doomsday where they can pick up cheap or companies are going to run towards them, I doubt it. Clearly, Berkshire is a one-man show of capital allocation. WEB, left the operating companies to themselves and focused on finding opportunities to deploy cash. Greg is an operations guy, and I am not sure he has the same skill set of WEB, and the cash is huge by any metrics.
Past performance are not guarantee⌠I will have more faith in past performance if there is an institutional process/ people/ bench etc. Past performance is basically WEB, and he is no longer running the show. Saying they got it correct in the past is a very wrong approach.
It is about time Berkshire starts buyback in earnest and consider trimming many meaningless operating companies and focus on what matters.
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Yes, Berkshire Hathaway actively deployed its cash reserves in the years immediately following the dot-com bubble burst. After sitting on significant cash during the late 1990s tech boom, Warren Buffett put billions to work when market valuations became more reasonable. ] Key deployment actions and purchases included: McLane Company, Clayton Homes, Corporate Bonds, Energy Infrastructure.
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Yes, Warren Buffett deployed significant capital after the real estate and global financial crisis of 2008â2009. He used his accumulated cash reserves to snap up heavily discounted assets, executing iconic investments such as: Goldman Sachs, General Electric, Burlington Northern Santa Fe, Bank of America.
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Warren Buffett did deploy a portion of his cash immediately after the 2020 COVID recession, but he also bought back record amounts of Berkshire Hathawayâs own stock. Here are the specific ways he deployed his capital during and immediately after the pandemic: Energy Investments: ( Chevron and Occidental Petroleum).
Stock Buybacks: Rather than buying external companies, he heavily deployed capital into his own business. ($50B),
Japanese Trading Houses: In the summer of 2020, Berkshire disclosed massive stakes in five major Japanese trading companies: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo.
Pharmaceuticals & Retail:** Buffett took smaller stakes in pharmaceutical firms (like AbbVie, Merck, and Bristol Myers Squibb) and homebuilders (like Lennar and D.R. Horton)
Yes, he has taken advantage of market downturns - over and over. But even if thatâs not the proximate cause, so what? Having watched a few corporate turnovers (those with grace, not when the CEO is suddenly cashiered), there tends to be a slower turnaround of the ocean liner (especially with the elder CEO still on the Board.)
Greg is getting rid of a lot of âdead woodâ. (We could argue whether Todd Combs investment portfolio was truly dead wood, but clearly Greg thinks so and wants to start a clean slate of his own choosing.) Additionally, I would point out that when there is a market swoon, it isn ât just the severely overvalued that takes a hit, itâs everything to some degree, at least until the market sorts it out. (That may be different today in light of hyper traders and the overly financialized economy, but historically thatâs been true.)
In a few of the cases mentioned above, it was still a couple years before acquisitions were made, when companies decided to sell out, before prices bottomed enough to make purchases worthwhile - even of Berkshireâs own stock.
At the moment the market is seriously above any reasonable trend line (yes, itâs being pulled relentlessly by tech, as it was in 1998-99) but that doesnât mean itâs time to go shopping. Possibly quite the opposite, especially if you are a value investor/trader, as is the culture of Berkshire. Itâs not like the cash is being burnt up or slithering down the sewer. Itâs being managed, I think, and Iâm willing to wait a while to see what comes of it.
I have some of my own, and itâs hard to just sit, but then they say patience is a virtue. Iâm trying to be virtuous.
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McLane, Clayton Home are in 2003. Yes, after 2000 but it is not after 2000 crash⌠The price and timing has not benefitted from the crash.
Literally government sent companies to Berkshire to get a stamp of approval from him. Many were not interested but forced.
Record is relative. Compare the buybacks viz-a-viz profits or cash generated each year, it is not even 100% of net profits. The cash pile kept growingâŚ
Comâon⌠Berkshire took advantage of low interest rates, and corporate credit rating, borrowed in yen cheaply, and bought the shares. If my memory serves me correctly, Berkshire didnât use any cashâŚ
You are listing many equity purchases, which are meaningless compared to the cash pile and they have nothing to do with any drawdown in the market. Your assertion they deploy cash on downturn is not true.
Berkshire old timers romance and believe Berkshire is waiting for value, etc. My own reading proves that is not the case. They are not getting any deals. Even if they can find a $100 B company, there are couple of extra 100 billions with them.
They are clueless what to do with that cash.. making meaningless small equity investments. It is time to return the cash to shareholders.
A drop in from the Berkshire board over at Shrewd.com:
"Late-stage bull market fever: Once a bull market gets under way, and once you reach the point where everybody has made money no matter what system he or she followed, a crowd is attracted into the game that is responding not to interest rates and profits but simply to the fact that it seems a mistake to be out of stocks. Like Pavlov's dog, these "investors" learn that when the bell rings - in this case, the one that opens the New York Stock Exchange at 9:30 a.m. - they get fed."----Warren Buffett, Sun Valley 1999
I have heard enough such wisdom⌠none of that explain that Berkshire today is clueless about what to do with the cash. BTW, if you look at the earnings for 1Q, they were significantly up, the earnings are catching up with the valuation and bringing down PE.
This is from Factset May 15th reportâŚ
Earnings Growth: For Q1 2026, the blended (year-over-year) earnings growth rate for the S&P 500 is 27.7%. If 27.7% is the actual growth rate for the quarter, it will mark the highest earnings growth rate reported by the index since Q4 2021 (32.0%).
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Valuation: The forward 12-month P/E ratio for the S&P 500 is 21.4. This P/E ratio is above the 5-year average (19.9) and above the 10-year average (18.9)
I understand in 1999 earnings went up sharply too, and post bubble the earnings dropped rapidly too. But saying the prices are going up without earnings is incorrect. This market, for all those who wants to find fault, cannot use lack of earnings as the reason.
Whether it is $NVDAâs of the world or memory chips or hyperscalers earnings is pretty strong, and the companies themselves have not borrowed massive sum, in fact not borrowed much so far to buildout.
Lastly, it is an echo chamber which will congratulate themselves for trailing the market by 10% per annum, declaring market is overvalued and they are holding great value. That tune has not changed since 2007.
$MU Our financial outlook has strengthened since our last earnings call. Weâre on track for another substantial record free cash flow in fiscal Q3. We expect tightness for HBM, Dram, and Nand to continue well beyond calendar year 2026.
Here is a simple chart that shows you where the market is pricey⌠but you will never call $COST and $WMT is priceyâŚ
Look at the profit $NVDA is making, this is one quarterâŚ
Now, I donât own any $NVDA, I got out during Deepseek scare; However, âthe lazy, wannabe, laboring under grand illusion of âvalue investorââ folks blindly ignoring the profits generated, repeating like a broken record, market is overvalued⌠because they were sitting on the sidelines and watching should be ignored. When I say this, me not in memory, semi trade is hurting my performance too⌠but I donât complain..
If your goal is avoid all the excitement, drama and just be content with 10% over 5 years⌠good for you. The old Berkshire crowd is so much in awe with themselves, which is okay, but donât insult others intelligence. I can quote at least 100 quotes where they were not just wrong, but gigantically wrong.
I am old enough, but still have enough memory to recall this identical, exact, word for word argument from 1998, when everyone was complaining that Buffett (and others) were ignoring tech, not making those fabulous riches that were to be had, and why was he so stupid as to not be investing in AOL, @Home, Cisco, Lucent, Global Crossing, WorldCom, and all the others that were showering riches on everyone?
I donât have any of the Tom Terrific 7 these days (I have had several in the past, but for one reason or another moved out. Better if I had stayed, but oh well.) One nice one I do have is Sandisk, which is doing, uh, well, and lots of petroleum which is likewise. But as I have said to others, I am no longer trying to get rich. Technically speaking I already am, I am merely trying to stay rich and Berkshire is an important part of that.
I understand some people needing to jump on every fast yacht that zooms by. I am happy to have a bigger ship with more ballast and a long track record of decent returns to carry me into my dotter-hood.
So far, so good.
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Same goal, different approach. I am making investments that meet my goals, so are you. But, I donât scream market is overvalued, or insult people who invests in those stocks.
hmmm⌠are you confusing that Berkshire doesnât have a clue what to do with cash, and should return the cash to Berkshire as buy tech stocks??? I am not suggesting Berkshire to invest in anything in particular, if anything, I argued they have too many meaningless operating companies, that need to be trimmed. My only point is they have accumulated so much cash, and generating decent amount of cash, it is about time to return cash via buyback and at some point dividend. It is not same as buy tech stocks.
I am unaware that I am insulting people who invest in âthose stocksâ. I merely opine that when one buys at a high price, more often than not, the results are sub-par, sometimes catastrophically.
Nope. If by âreturn cashâ you mean âdividendâ or âspecial payoutâ, then you have missed the times when shareholders have overwhelmingly asked not to be forced to realize income, lest their tax situations vary from what they have planned. If you mean âbuybacksâ then the company is and has done that, but only at a price where they feel comfortable doing so to maximize the potential for future beneficial returns. Are you saying they should buy back at any price?
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Not you. Sorry, that was about old Berkshire folks.
That was a 12 years ago⌠and WEB is no longer there. The argument on the buyback is laughable⌠Just read what WEB says about Apple buyback or other buybackâs⌠clearly do what I say not what I do.. 
In any case, most of the arguments you present are nothing new. It is beaten to death. Clearly Berkshire share performance is suffering because of that.
Buffet is a great investor. Today it is a different company, Buffett era arguments make no sense. It is time the company returns the cash to their shareholders, otherwise the murmurs that Buffett doesnât like sharing the profits of Berkshire with his shareholders will be louder and taint his great legacy.
The S&P 500 companies have paid $671 B in dividends last year, and the big 6 banks have announced $176 B in buyback.
Just sayingâŚ