Warren Buffett still thinks Berkshire Hathaway shares are cheap enough to buy


There is no bubble in Berkshire Hathaway Inc. shares, as Warren Buffett and Charlie Munger still believe they are cheap enough to spend over $ 6 billion to buy them back in the first quarter, and maybe over a billion dollars since then.

The buybacks were executed even as Berkshire Hathaway shares continued to hit record highs. Class A shares set 17 closing records during the quarter and Class B shares set 18 records, including seven in March. In April, class A shares set 8 records and class B shares set 7 records.

Berkshire Hathaway revealed in its Monday 10-Q filing with the Securities and Exchange Commission that it repurchased a total of $ 6.57 billion of its shares in the first three months of 2021. This included $ 1.69 billion of Class A shares at a weighted average price of 366,073.56 $ and $ 4.88 billion of Class B shares at $ 237.44, according to a MarketWatch calculation of SEC data.

UBS analyst Brian Meredith said first quarter buybacks were higher than his initial forecast of $ 5.0 billion for the quarter. And Meredith said recent information suggests an additional $ 1.4 billion in shares may have been repurchased since the end of March.

“We believe that the share buyback will continue to be active as we believe [Berkshire Hathaway’s] The share price is currently 13% below its intrinsic value, ”Meredith wrote in a note to clients.

In July 2018, Berkshire Hathaway changed its share buyback program to give Chairman and CEO Buffett and Vice Chairman Munger more flexibility as to when they can buy back shares. The program states that the shares can be repurchased as long as Buffett and Munger believed the prices were “below Berkshire’s intrinsic value, determined prudently,” and as long as Berkshire had at least $ 20 billion in cash and nearly. cash.

Looking back, it looks like Buffett and Munger know what they’re doing, as Class A shares BRK.A,
+ 0.71%
jumped 2.1% on Monday to a record $ 421,179.00 in afternoon trading and class B shares BRK.B,
+ 0.67%
climbed 1.9% to a record high of $ 280.17.

FactSet, MarketWatch


Over the weekend, Berkshire Hathaway announced that it made a profit of $ 11.7 billion in the first quarter, down from a loss of $ 49.7 billion in the same period a year ago , citing market gains and better insurance results.

Read more: Warren Buffett warns investors not to bet on stocks.

Read also: Charlie Munger “hates” the rise of bitcoin: “Disgusting and contrary to the interests of civilization.

Here is the monthly breakdown of Berkshire’s buyouts in the first quarter:

Month Shares (Class A) Price Amount

January

1,534

$ 348,488.65

$ 534.6 million

February

1,959

$ 362,748.29

$ 710.6 million

March

1,113

$ 396,162.91

$ 440.9 million

Total

4,606

$ 366,073.56

$ 1.69 billion

Month Shares (Class B) Price Amount

January

10 661 127

$ 231.68

$ 2.47 billion

February

5,341,489

$ 237.06

$ 1.27 billion

March

4,545,124

$ 251.40

$ 1.14 billion

Total

20 547 740

$ 237.44

$ 4.88 billion

The volume-weighted average prices were $ 373,970.54 for Class A shares and $ 242.91 for Class B shares, according to a MarketWatch calculation of FactSet data.

As of July 2018, Berkshire Hathaway has repurchased a total of $ 37.65 billion of its shares, including $ 8.88 billion of Class A shares and $ 28.77 billion of Class B shares.

The company still had the resources to repurchase many more shares, as the company had $ 56.83 billion in cash and cash equivalents as of March 31, 2021.

UBS’s Meredith said he had raised his 2021 share buyback forecast to $ 11 billion, from $ 9 billion. He said his forecast might turn out to be “too conservative,” given Buffett’s comments that Berkshire could not buy shares of other companies as cheaply as they can buy theirs.

Over the past 12 months, Berkshire Hathaway Class A shares have risen 53.7% and Class B shares have climbed 53.4%. Meanwhile, the XLF exchange-traded fund of SPDR Financial Select Sector,
+ 0.24%
climbed 65.8% and the S&P 500 SPX index,
-0.36%
grew by 48.4%.


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