Warren Buffett, during an interview with Becky Quick from CNBC, on February 24, 2020. It turned out to be another year in which the billionaire investor avoided purchases that changed the game on an expensive market, even after a gross amount of cash on the market and as his company holds a massive cash balance.
Gerald Miller | CNBC
As the coronavirus pandemic unfolded in the markets in 2020, Berkshire Hathaway of Warren Buffett bought a record amount of the company’s stock. And shopping continued until 2021, according to the conglomerate’s annual letter, which was released on Saturday morning.
In the fourth quarter, the company repurchased about $ 9 billion of Berkshire shares, bringing the total redemption from 2020 to $ 24.7 billion.
“Berkshire has repurchased several shares since the end of the year and is likely to further reduce its number of shares in the future,” it said in its annual letter.
During the third quarter, the conglomerate again bought $ 9 billion worth of shares, up from $ 5.1 billion in the second quarter. The figures compare to a total of $ 5 billion the company spent on redemptions in 2019.
Buffett pointed out that the company only engages in share repurchase programs when it believes the shares are trading below their intrinsic value.
“By no means do we believe that Berkshire shares should be repurchased at any cost,” Buffett said in the annual letter. “I emphasize this point because American executives have an embarrassing record of allocating more company funds to redemptions when prices have risen than when they have fallen. Our approach is exactly the opposite.”
Berkshire’s operating income, which Buffett urges shareholders to focus on, reached $ 5.02 billion in the fourth quarter, up from $ 4.42 billion in the same period last year. For the full year, operating earnings fell 9% to $ 21.922 billion as the pandemic hit the Berkshire business conglomerate.
The company’s net earnings – which represent Berkshire’s major public investment – rose 23% each year to $ 35.835 billion. However, for the full year, net earnings fell 48% to $ 42.521 billion.
Berkshire Hathaway’s Class A shares hit a new all-time high on Thursday, after jumping 52% from March 23. For the year, the stock rose about 5%, surpassing the 2% gain of the S&P 500.
Even after Berkshire’s record repurchase in 2020, the company still has a sizeable pile of cash at $ 138 billion. The figure drops from $ 145.7 billion at the end of the third quarter.
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