Berkshire Hathaway’s recent 1.2% share count reduction suggests that chairman Warren Buffett might be leaning toward a more aggressive share buyback of the conglomerate’s underperforming stock. This according to a recent article in Reuters.
“Buffett’s buyback appetite had been relatively muted since July 2018,” the article reports, “when a policy change let him, and Vice Chairman Charlie Munger, repurchase stock when they thought its price was below Berkshire’s intrinsic value.” That policy allowed buybacks at prices up to 1.2 times book value. According to Edward Jones & Co analyst James Shanahan, Berkshire’s current multiple is estimated at 1.1.
Berkshire’s previous buybacks reportedly totaled about $8 billion, including $1.7 billion between January and March as the coronavirus took hold and drove down the stock price. Berkshire’s recent regulatory filing reflects that the company now has just over 1.6 million Class A shares outstanding, down about 19,000 from April 23rd.
“Some investors believe Berkshire’s cash has hurt its stock price,” the article says. But when asked about buybacks at this year’s annual meeting held in May, Buffett reportedly responded that Berkshire’s share price had not dipped to “where it really feels way better to us than other things, including the option value of money, to step up in a big, big way.”