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Berkshire Hathaway Inc. repurchased $ 928 million of its shares in the third quarter, a rare move that says its chairman, Warren Buffett, sees a shortage of attractive investment options for his company's large cash reserve.
Berkshire has not made a major acquisition since the acquisition of Precision Castparts Corp. for $ 32 billion in 2016. Mr. Buffett is a high value investor, best known for his attractive offers when prices are low. After more than nine years of bull market, he has struggled to find significant investments and attractive prices.
At the same time, many Berkshire businesses, such as Duracell, Geico and BNSF Railway, continued to generate liquidity.
Although the redemptions made by Berkshire are small compared to its balance sheet, they represent a change in the company's willingness to return money to investors. Berkshire has not bought back shares since 2012, when it repurchased approximately $ 1.3 billion of shares, mainly from a long-time shareholder.
Mr. Buffett has long argued that it could better increase shareholder value through investments only through redemptions or dividends. But the pressure to buy more shares has increased in recent years, in line with Berkshire's cash flow growth.
The conglomerate of Omaha, Nepal, had $ 103.6 billion in cash at the end of September, against $ 111 billion in mid-year, the company said Saturday.
US companies are buying record amounts of stock this year after the 2017 tax legislation overhaul.
Berkshire said Saturday that its net profit in the third quarter had soared, boosted by unrealized gains on its equity investments. Berkshire reported a net profit of $ 18.5 billion, or $ 11,280 per Class A Share Equivalent, compared to $ 4.07 billion, or $ 2,473 per share, over the same period of time. 39, previous year.
Berkshire's earnings are volatile as a result of an accounting rule that came into effect this year, which requires companies to include unrealized investment gains or losses in their bottom line. Quarterly changes in the value of equity investments in Berkshire can have a significant impact on its bottom line.
Operating income, which excludes certain investment results, reached $ 6.88 billion, compared to $ 3.44 billion the previous year. Buffett said the operating profit better reflected Berkshire's performance.
Berkshire changed its buyback policy in July. Previously, the company could redeem shares if the stock price was less than 120% of the book value. Under the new policy, Berkshire can buy back shares if Buffett and his associate, Charlie Munger, believe the share price is below Berkshire's intrinsic value.
In August, on CNBC, Buffett said Berkshire had bought shares "at a price we know will benefit the remaining shareholders because we bought it."
Berkshire repurchased shares at an average price of $ 312,806.74 per A share and $ 207.09 per share BM Buffett has warned shareholders in the past that there are no prices for which it will ultimately buy back shares .
Mr. Buffett defended the buy-backs against critics in his 2016 letter to shareholders. Buybacks are a benefit to shareholders as long as the shares of a company are undervalued, he said: "The question of whether a repurchase transaction increases or destroys value for the remaining shareholders depends entirely on the purchase price. "
The book value amounted to $ 228,712, representing one Class A share on September 30, an increase of 8% for the first nine months of the year. Last year, Berkshire recorded an 8.9% increase in its book value for the comparable nine-month period.
Class A shares closed Friday at $ 308,411, up 3.6% for the year.
In recent months, Berkshire has invested approximately $ 600 million, two leading emerging market financial technology companies. The transactions were led by Todd Combs, one of Berkshire's two portfolio managers.
Write to Nicole Friedman at [email protected]
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