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Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) recently released its third quarter earnings report, and for the most part, there weren’t too many big surprises. For example, the company’s earnings have increased due to the strong performance of stocks, Berkshire’s operating activities are generally performing well, and while the company’s cash flow has declined a bit, it hasn’t been dramatically.
Generally speaking, we don’t get a glimpse of what stocks Berkshire is buying or selling until it files its final 13-F with the SEC, which shouldn’t happen for a few days (this is required). 45 days after quarter ends, which means we’ll see it by November 14).
But we did discover a stock purchase made by Berkshire during the third quarter: Berkshire Hathaway. And he bought many of it.
Image source: The Motley Fool.
Berkshire buyouts in the third quarter
In the third quarter, Berkshire repurchased nearly $ 9.3 billion of its own shares. This is the most that Berkshire has bought in a single quarter, by far. This was in addition to the $ 5.1 billion in shares bought back by Berkshire in the second quarter, which was the company’s previous record for a quarterly buyout.
Berkshire not only reports the number of shares repurchased and the total price paid, but it also breaks it down by month and the average price paid per share. Here’s a month-by-month breakdown of Q3 redemptions:
|
Month |
Total shares repurchased (equivalent of class B) |
Average price paid per share |
Total paid |
|---|---|---|---|
|
July |
13,469,219 |
$ 187.77 |
$ 2.529 billion |
|
August |
14 643 095 |
$ 210.28 |
$ 3.079 billion |
|
September |
16 892 889 |
$ 216.14 |
$ 3.651 billion |
|
Total |
45 005 203 |
$ 205.73 |
$ 9.259 billion |
Data sources: Berkshire Hathaway quarterly filings and author’s calculations. A “class B equivalent” considers a class A share to be 1,500 times the economic interest of a class B Berkshire share.
What does this mean for investors?
To put it mildly, this is an aggressive buyout. Berkshire repurchased just under 2% of its outstanding shares in the third quarter, after an already aggressive total in the second quarter.
If you’re not familiar, Berkshire changed their buyback plan a few years ago to allow the team to buy back stock at any time. Warren Buffett and VP Charlie Munger agree the stock trades with a significant discount compared to its actual value.
Here are the main takeaways for investors: Take another look at the buyback chart, and in particular the prices Berkshire paid to buy them back. Two of the best investors of all time apparently felt the stock was very cheap at these prices. Particularly interesting is that, as Berkshire’s share price began to rise throughout the third quarter, Buffett and Munger didn’t pump the brakes – they bought back. more at the highest prices.
It’s also worth noting that aggressive buybacks could certainly continue. Even after aggressive buybacks, Berkshire ended the third quarter with $ 145.7 billion in cash and cash equivalents on its balance sheet. So if Berkshire management feels the stock is a good deal, the recent buybacks might just be the start.
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