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(Bloomberg) – Warren Buffett has slowed his body roll.
Despite more than $ 144 billion in funds at his disposal, the CEO of Berkshire Hathaway Inc. ended up stepping back with his capital deployment in the second quarter. He only repurchased $ 6 billion of Berkshire shares, the lowest amount of buybacks since mid-2020, and was a net seller of other shares for the third consecutive quarter, according to second quarter results of the conglomerate published on Saturday.
Buffett has faced a high class problem in recent years: too much money and too few opportunities. He was pressured to close a big deal to help boost the growth of the company, but failed to find attractive and well-priced options, which led Berkshire to spend even more funds to buy back its actions. But now he’s no longer at a stalemate. Berkshire stock, already a challenge due to its lack of liquidity, has rallied in recent months and the broader stock market has also become more expensive with the S&P 500 index hitting new highs.
“They’re sort of between a rock and a hard place,” CFRA Research analyst Cathy Seifert said in a telephone interview. “In this context, I think the level of buybacks was prudent and appropriate.”
Yet for an executive who had previously avoided buyouts in favor of other means of deploying capital, Buffett’s $ 6 billion second-quarter buyback ranks as the largest fourth quarter since Berkshire began buying back. more actions in 2018.
‘Housekeeping’
Berkshire only sold $ 1.1 billion in other shares during the period, on a net basis, the lowest amount of net sales in the past three quarters. Those sales appear to come largely from a decrease in its group of commercial, industrial and other inventories, according to a regulatory filing on Saturday. Berkshire is set to report its specific inventory changes in a filing later this month. Berkshire shareholder Tom Russo said the move was smart given the overall level of the stock market.
“It’s housekeeping,” Russo, who oversees $ 10 billion, including investments in Berkshire stocks at Gardner Russo & Quinn LLC, said in a telephone interview. “He’s ready to do a lot more. He’s been in and out of airlines, he’s been in and out of other operations.
In the quarterly report, Buffett, who will turn 91 later this month, gave no indication of how he plans to use his cash flow. He also made no mention of succession plans, after saying in May that Greg Abel was the main candidate to succeed the chief executive.
Meanwhile, the conglomerate has continued to move forward, helped in part by a U.S. economy that has rebounded from the initial lows of the pandemic last year. Berkshire’s profit jumped about 21% to $ 6.7 billion during the period, thanks to gains from its manufacturers, service companies and retailers. This group of companies reported their second-highest quarterly profit in data dating to mid-2009.
The Berkshire Railway BNSF has posted a record quarterly profit since Berkshire acquired the company. Revenue of $ 1.5 billion was helped by increased volumes and better productivity, the company said.
Yet the conglomerate was not immune to the effects of inflation. Berkshire has faced higher costs for certain materials hitting businesses such as its house building operations.
Berkshire also felt some pain due to higher losses at its auto insurer, Geico. Drivers returning to the road with the opening of the United States in recent months have resulted in more frequent crashes, causing underwriting profit at Geico to drop nearly 70% in the second quarter. In another unit, he had to shell out $ 160 million to help contain and respond to a fire at one of chemicals maker Lubrizol’s facilities in Rockton, Ill., In June, he said. he declares.
Berkshire Class A stock rose 8.5% in the second quarter, after gaining nearly 11% in the first three months of the year.
(Updated with analyst quote in fourth paragraph, sale details in sixth paragraph, shareholder quote in seventh paragraph.)
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