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Investors at Berkshire Hathaway Inc. were rewarded on Monday after Warren Buffett's investment firm announced a sharp rise in third quarter earnings and said it had bought some of its shares for the first time in six years.
Class B shares
BRK.B, + 4.88%
Afternoon trading climbed 5.1% to a sixth consecutive gain, and enough to offset the gains of its financial peers, while
BRK.A, + 5.44%
shares gained 5.6%. Given the stock's performance since the company's last stock purchase, it's no wonder Buffett is betting on himself, listening to investors.
The company announced that its net income for the quarter and September 30 has more than quadrupled from $ 4.07 billion to $ 18.54 billion. Since Berkshire Hathaway adopted new accounting standards, last-quarter earnings include $ 11.4 billion of unrealized gains and losses resulting from changes in the fair value of its equity investments, while results prior to January 2018 recorded unrealized gains and losses in other comprehensive income.
Do not miss: Buffett's Berkshire stock is the best day in seven years after the change in buyback policy.
Berkshire insisted that investors should not pay too much attention to the $ 11.4 billion investment, and said it only because they are now forced to do so:
| "The amount of investment gains / losses in a given quarter is generally meaningless and provides earnings per share figures that can be misleading for investors who know little or nothing about accounting rules. " |
Berkshire Hathaway indicated in its quarterly filings with the Securities and Exchange Commission that it was repurchasing $ 928 million worth of Class A and Class B shares over the course of the year. quarter, which has not been done since. December 2012. This information comes after the company changed its stock repurchase policy in July in order to give the Chairman of the Board and Chief Executive Officer, Buffett and Vice President Charlie Munger, more flexibility regarding when they can buy back shares.
The company declared that it had purchased 225 Class A shares at an average price of $ 312,806.74 and 4,139,192 Class B shares at $ 207.09, for a total expenditure of $ 927.57 million. This means that Buffett and Munger believe that the redemption prices are lower than the "intrinsic value" of Berkshire, in accordance with the new buyback policy.
These purchases have so far worked well in the near term, with Class A shares trading at over $ 325,600 on Monday afternoon and Class B shares over $ 217.
FactSet, MarketWatch
In December 2012, Berkshire purchased 9,475 Class A Shares at an average price of $ 131,065.62 and 606,499 Class B Shares at $ 88.76, for a total expenditure of approximately $ 1.30 billion. . Buffett's and Munger's decision to buy back shares at that time comes after the company changed its policy to allow them to pay up to 20% of the book value over an earlier limit of no more than 10%. .
Since the end of 2012, the Class A shares have climbed 143% and the Class B shares, about 142%. In comparison, the SPDR Financial Select Sector Exchange Traded Fund
XLF, + 1.57%
whose most weighted component is Berkshire, gained 102%, the S & P 500 index
SPX, + 0.44%
rose 92% and the Dow Jones Industrial Average
DJIA, + 0.63%
increased by 94%.
The day after Berkshire announced the previous purchases after the close of March 1, 2013, the Class A shares rose 0.1% and the Class B shares declined 0.1%. Three months later, shares A and B were up 12%, while the Dow Jones index was up 8.3%.
See also: The big bet that Warren Buffett made on Apple asks a Wall Street trader: has he lost it?
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