Photography by David Williams / Bloomberg
The highlight of
(ticker: BRKB) The release of the fourth quarter results, scheduled for Saturday, could be the amount of shares bought back by the company in the fourth quarter.
Berkshire observers will look closely at the number of redemptions to indicate the views of CEO Warren Buffett on the title. Buffett is also able to address the buyout in his eagerly awaited letter to shareholders, which is also due on Saturday.
Wall Street seems to be expecting a modest buyout of the order of $ 2 billion. If the redemptions are well above this amount, it could drive up Berkshire's shares, as this would indicate that Buffett and Vice Chairman Charlie Munger think the stock is cheap.
With Berkshire valued at more than $ 500 billion, a $ 2 billion buyback would result in an annualized surrender rate of less than 2%. This is not a big deal as Berkshire does not pay a dividend. Many banks buy more than 5% of their shares each year while paying dividends of 2% to 3%.
Read more: Berkshire of Warren Buffett did not buy much when the market collapsed in the last quarter
David Rolfe, Investment Manager at Wedgewood Partners in St. Louis, Berkshire Holder, hopes the company will shock Wall Street with a $ 7 billion to $ 8 billion buyback in the fourth quarter, or, as he puts it, figure "billion. Morgan Stanley analyst, Kai Pan, estimates $ 2.5 billion and Barclays analyst Jay Gelb at $ 1.5 billion.
Berkshire began its third quarter buyback program and repurchased $ 928 million worth of shares. The amount was modest, perhaps reflecting that the plan had started in August and that the company did not have a full quarter to execute it.
shares, which are up $ 650 on Tuesday, or 0.2%, to $ 308,789, have fallen behind on the
S & P 500
in 2019 and in the last 12 months. Berkshire rose 1% in 2019, behind the S & P 500, up 11.3%.
Some Berkshire fans are frustrated by the relatively weak performance of the title and would like to see a vote of confidence from Buffett, particularly because of the collapse of Berkshire stocks at the end of the year. Berkshire's Class B shares, up 69 cents to $ 205.98, fell below $ 200 on the liquidation of the market in December.
Berkshire's decision to add less than $ 1 billion worth of securities to its huge stock portfolio in the fourth quarter is a sign of a more aggressive takeover, after being a net buyer of $ 12 billion worth of shares in the third quarter. quarter. Some Berkshire investors were surprised to find that Buffett was not more aggressive when buying stock during the year-end decline. It is possible that Berkshire instead bought a lot of his own shares, using his huge cash reserve, which amounted to more than $ 100 billion at the end of the third quarter.
A major buyback in the fourth quarter would be seen as a sign that Berkshire will continue to be aggressive in repurchasing this year. 88-year-old Buffett, while often advocating buybacks of companies in which Berkshire is a stakeholder, has long been reluctant to buy back his shares at Berkshire. But with such a large amount of money and the impossibility of finding a major acquisition, Buffett may have determined that buybacks now made more sense.
Berkshire is expected to post strong fourth quarter operating profit, while Morgan Stanley's Pan would get $ 5.5 billion, up 64% from the same period last year. Berkshire, however, should record a significant loss in the fourth quarter, reflecting the sharp drop in its huge stock portfolio, which totaled $ 183 billion at the end of the year.
Write to Andrew Bary at [email protected]