Yeah, and they were doing big buybacks - HUGE - in 2007 as their market was collapsing around them. They managed to vaporize hundreds of billions of dollars in value for their shareholders because … they couldn’t read the room.
Look, I get that you are impatient. I would just note that the new CEO has been in the job for all of 4 months and 22 days. During that time he has cleaned out a portion of the stock portfolio that he doesn’t think fits (the Todd Combs picks) [no opinion from me on whether that’s the right thing or not], picked up other stuff including a pretty drastic change of direction in tech, snapping up billions worth of Google (Alphabet, actually) and some other stuff: Delta, Macy’s, etc [again, no opinion]. Hosted his first annual meeting, for which I give him a week or two grace for prep, met with leaders of his insurance subs and the railroad on operational issues, and …
You are standing there yelling “Swing, ya bum.” Warren always said “Wait for the good pitch.” Maybe that’s what’s going on.
hmm the bum is swinging… no I don’t want you to twist yourself to justify… this is what I am bit worried, that instead of giving cash back to the shareholders, the rightful owners, they will do empire building, … I have my concerns on both the investments… given the last few (or many) were pretty unimpressive.
The buybacks have started, $4.53 B, they haven’t done any in April, but started in May and increased it in June. The rest of the business chucked along.
From the below table, it seems the buyback may have continued, also, some A shares were converted to B shares… Assuming $500 average B-share price it should be around $3.4 B
Berkshire were net buyers of equity, reducing their cash hoard slightly. The top 5 holdings were 66% of $323 B equity portfolio, talk about concentration risk! Separately Berky has $217 B in unrealized gains!
Kingran’s Rant: This is for those folks who complain SP500 has concentration risk, and completely ignore their own concentration in Berky or Berky’s concentration… Of course everyone has a right to be a hypocrite!!
Capex: The company modestly invested in BNSF $996M against $698M D&A, and BHE $2,531 against $1,048 D&A; Net capex is about $2 B higher after subtracting D&A. I consider D&A needs to be invested back in the business in the form maintenance capex. Clearly, Berky doesn’t see much opportunity to invest fresh capital in their existing business.
While I consider operating companies performance are average or slightly below peers, they are not deal breakers for me.
Overall, I am glad to see they started buyback and getting aggressive about it.
[Berkshire Hathaway]
put a dent in its massive cash haul during the second quarter, repurchasing company shares and buying more stocks than it sold for the first time in more than three years.
The Omaha, Neb.-based conglomerate said Saturday its quarterly profit more than doubled, powered by investment gains and strong results from its industrial and retail businesses.
Net income rose to $25.67 billion, or $17,868 per Class A share, from $12.37 billion, or $8,601 per Class A share, a year earlier.
Berkshire ended June with $364.7 billion in cash and Treasury bills after accounting for a payable for purchasing some of the short-term government debt, a 4% decrease from three months earlier. It marked the first time the company’s cash declined sequentially in four years
If you cannot find reasonable investments and just keep piling cash to the tune of $350B then you are clueless, give the money back to shareholders… it is not complicated.
My thesis still holds. I believe that given sufficient volume that they won’t affect the market significantly, they will buyback shares at some price under a multiple of IV (or BV, or whichever measurement they feel is best at the time). I’ve been repeatedly buying spreads (Bull Call Spreads) at a little lower than what I think that multiple is. Right now I have a 460/480 BCS that will be disposed of when it reaches about 99% of maximum value. To me, it appears to be a VERY conservative trade with good returns over the period. Not spectacular returns, but good returns.
The rapid increase in price recently might inhibit my next spread purchase, and I may skip a month and perhaps wait for better prices (i.e. when that ratio is somewhat lower).
Capital allocation should lead to increase in long-term profits per share. You can achieve that with capex, leading to higher revenue, profits, alternatively buy equity securities with an aim to make capital gains (of course the above two are inherently risky), then you can invest the money in bonds, treasuries, where you will earn interest… all can contribute to the profits per share.
But for a decade, Berkshire didn’t want to take risk. Their existing businesses cannot observe the cash they are generating, they were trimming public equity securities, and unwilling to return the cash to shareholders and just let the cash pile up.
Yes, WEB is a greatest investor of all time, and he build a great company. But if you are a new shareholder the company is not that appealing. The long term investors and WEB fanboy’s justified the “standing still”, because many have large capital gains and they, like WEB, don’t want to risk and willing to settle single digit returns, and found comfort in the cash position. Berkshire board is nothing but WEB fanboy’s. There is no one who can stand up to WEB. Ofc, WEB has a huge stake and complete confidence of his investor base.
If you measured the company performance on ROIC or any of your favourite measurement, you will see Berkshire performance is sub-optimal.
The share buybacks should drive per share profits over time. There is no explanation, no justification that they suddenly stopped doing buybacks.
Yes I am glad to see it is resumed. I would rather see them return the cash to shareholders, than do meaningless acquisitions. My real fear is the company will continue to buy “Dexter shoes”…
Maybe it’s “for a decade things were overpriced”. And while there were other areas where the market would have rewarded, they were outside the core competency of the institution. So rather than buying “anything at any price” they chose to bide their time.
Easy answer: Don’t be a “new investor” if you don’t like the investing philosophy or what’s going on in the corporation. I do it daily with thousands of corporations where I might direct my dollars … but don’t.
There is a very rich and well defined explanation: we do buybacks when the book value is below our calculation of intrinsic value.
Not really your best example, since that one happened over 30 years ago. Is there a more recent one? (And, FWIW, the CEO has repeatedly acknowledged the mistake, something exceptionally rare in today’s CEO ranks.)
That is not an explanation… the share price vs BV or earning power is not cheap today nor expensive when they stopped buybacks…or when they were doing buyback…
WEB literally cheated his investors with that stupid line and his investor base tolerated that BS explanation.
Let me flip it and ask you give me an example of a recent purchase that has clearly added value… in my opinion after BSNF only Alleghany Purchase made sense, both strategically and economically.
Note the masses of cash are probably invested in bonds. That tends to make Berkshire into a bond fund. And what return do you expect? 4%? Or do they invest it at higher risk?
My most recent spread sold (my price was triggered, $19.85 or 99.25% of maximum value) last week during the brief spike in stock price. And I entered into a new spread this week when the shares were trading just under $500. The thesis still holds as far as I can see.
