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Berkshire Hathaway, the billionaire's subsidiary, has exceeded the expectations of its shareholders.
(Photo: AP)
New YorkWarren Buffett has always been a miser. The star investor prefers to buy undervalued companies and then benefits when the adjustment is made. But in the nine-year bull market, prices for conglomerate Berkshire Hathaway have simply become too expensive. As a result, Buffett bought $ 928 million worth of Berkshire shares in the third quarter, the company said on Saturday.
This is a rare step. Buffett has always argued in the past that he prefers to invest capital in companies or stocks to multiply rather than buying his own stock. However, his turnaround suggests that he also does not expect a drop in prices in the foreseeable future. More recently, Buffett bought shares in 2012 worth $ 1.3 billion.
Already in July, the director of Berkshire and his vice-president, Charlie Munger, had adopted a new rule to facilitate share buybacks. Berkshire's share rose 3.6% this year and cost $ 308,411 on Saturday. The overall S & P 500 index is up 1.9% this year, following major fluctuations in recent weeks.
Berkshire posted good results in the third quarter on Saturday. Operating income almost doubled over the previous year, reaching $ 6.9 billion or $ 4,185 per share. Net profit was even higher at $ 18.5 billion. That's more than four times as much as in the third quarter of 2017. However, Buffett cautioned his investors to attach too much importance to this figure.
Following a change in accounting, Berkshire must now also include changes in the equity portfolio in the net gains at the end of each quarter. Buffett criticized this new rule as "misleading for investors who have little or no accounting knowledge."
Finally, investment gains and losses could fluctuate considerably without giving any indication of the strength of Berkshire Hathaway. The company, based in Omaha, Nebraska, has a capital of more than $ 100 billion, including significant holdings in companies such as Apple, Wells Fargo, Coca-Cola and American Express.
In operational terms, all divisions recorded sales growth. Most importantly, Berkshire's strong insurance business again generated profits. Disaster-related claims were lower this year than in 2017, when the division recorded a loss. Railroad operator BNSF, Precision Castparts and many other Berkshire subsidiaries benefited from the strength of the US economy and tax cuts.
Buffett continues to search for offers. Over the past few months, Berkshire has invested $ 600 million in two emerging-market financial technology companies. He also remains interested in German companies, said his German representative, Zypora Kupferberg, last week at a Handelsblatt conference in Frankfurt.
He has enough money for that. Even after the stock buybacks, its cash reserves are still at $ 103.6 billion.
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