Buffett Spends Record $2.2 Billion Buying Up Berkshire Shares

Warren Buffett kicked his stock-buyback program into high gear, spending $2.2 billion on repurchases in the last three months of 2019, the most ever in a single quarter.

  • Buffett’s Berkshire Hathaway Inc. loosened its buyback policy almost two years ago after being stymied on the dealmaking front. Since then, Berkshire has taken a cautious approach to repurchases, buying back only $6.3 billion of stock. JPMorgan Chase & Co., which counts Berkshire among its investors, bought back $6.7 billion on a net basis in the fourth quarter alone.

Key Insights

  • Buffett can’t seem to keep up with the ever-growing pile of cash, which reached $128 billion at the end of 2019. Buffett, Berkshire’s chairman and chief executive officer, has sought to redeploy those funds into higher-returning deals or stock purchases, but has been stymied by what he’s said are “sky-high” prices for good businesses.
  • Kraft Heinz Co., which counts Berkshire as its largest shareholder, had a tumultuous 2019, with writedowns, management shakeups and downgrades to junk. Buffett’s company carries its Kraft Heinz investment on its balance sheet at $13.8 billion, a figure unchanged since 2018’s fourth quarter, even as the market price of the stake dropped to $10.5 billion at the end of last year.
  • Berkshire’s operating earnings fell 23% in the fourth quarter from a year earlier, driven in part by an underwriting loss at its insurance operations.
  • Berkshire’s BNSF railroad posted a 3.8% gain in profit in the fourth quarter, just shy of record earnings in the previous three months, as a decline in expenses helped counter falling revenue across shipments of products such as coal, consumer items and agricultural goods. BNSF posted a regulatory filing Friday night, on the eve of the release of Buffett’s annual letter, giving investors a sneak peek of results.

Market Reaction

  • Berkshire’s Class A shares underperformed the S&P 500 Index last year by the widest margin since 2009. The stock has gained just 1.1% this year.

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  • Berkshire’s net income swung to a profit of $29 billion due to swings in its $248 billion stock portfolio, which started showing up in earnings two years ago following an accounting change.
  • Berkshire’s annual report is here.

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