Mon, Nov 05, 2018 - Page 16 News List

Buffett shows a hunger for stocks, including his own

Bloomberg

The world’s most famous stock-picker showed a growing appetite for equities in the third quarter — including a rare move to buy his own firm’s shares. Now, last month’s market slide opens the door for Berkshire Hathaway Inc chairman Warren Buffett to finally make a dent in his giant pile of cash.

He poured more money into stock purchases last quarter than he has in more than four years. Buffett also spent US$928 million on share buybacks during a few weeks in August, a move he has typically spurned.

While the repurchases amounted to less than 1 percent of the company’s cash, they set a new precedent.

“It’s really important in terms of a signaling effect,” Edward Jones analyst Jim Shanahan said in a telephone interview. “What they’ve demonstrated is a willingness to use cash to buy back the stock if it reaches a value that they believe is less than intrinsic value.”

Berkshire Hathaway on Saturday reported it earned US$18.54 billion, or US$7.52 per Class B share. That is up from last year’s US$2.47 billion, or US$1.65 per B-share, when insurance losses from several hurricanes hurt results.

Operating earnings, which offer a better view of quarterly performance, because they exclude investments and derivatives, were US$6.88 billion, or about US$2.79 per Class B share. up from US$3.44 billion, or about US$1.40 per B-share.

Buffett, 88, has long preferred to use Berkshire’s cash to hunt for large deals or snap up stocks in companies such as Apple Inc and Coca-Cola Co, while struggling to put to work a cash pile that has topped US$100 billion in the past five quarters.

In July, Berkshire’s board loosened repurchase policy, allowing Buffett and vice chairman Charlie Munger to buy back stock whenever they felt the shares were below intrinsic value.

The previous policy limited them to purchasing stock only when the price was below a 20 percent premium to book value.

Now, the worst month for US stocks in seven years has made several of his favorite companies significantly cheaper. Shares of Apple have dropped 8.1 percent since the end of September, while Bank of America Corp has slumped 5.3 percent in that time period.

Buffett purchased US$12.6 billion of equity securities on a net basis during the third quarter, the most in more than four years. A regulatory filing indicated Berkshire added billions to its stake in Bank of America in the third quarter, continuing a trend from the second quarter of adding to positions in financial stocks.

The market declines have also left Berkshire’s shares below the price where Buffett bought them back, leading some investors to think he could dwarf the third quarter’s total in the final three months of the year — despite his feelings on buybacks.

“It’s close to one of the last things he wants to be doing,” said Steven Check, president of Check Capital Management, which oversees US$1.5 billion, including investments in Berkshire. “He’s avoided it pretty well for 50-plus years.”

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