Warren Buffett during an interview with Becky Quick of CNBC on February 24, 2020. It seems to be another year in which the billionaire investor shied away from game-changing acquisitions in an expensive market, even after a sudden cash market and while his company a massive cash balance.
Gerald Miller | CNBC
As the coronavirus pandemic hit markets in 2020, Berkshire Hathaway’s Warren Buffett bought back a record amount from the company. According to the conglomerate’s annual letter issued on Saturday morning, the purchases continued until 2021.
In the fourth quarter, the company repurchased approximately $ 9 billion of Berkshire shares, bringing the total repurchase of 2020 to a record $ 24.7 billion.
“Berkshire has repurchased more shares since the end of the year and is likely to further reduce its share in the future,” reads its annual letter.
During the third quarter, the conglomerate repurchased $ 9 billion of its own inventory, up from $ 5.1 billion during the second quarter. The figures compare to the total of $ 5 billion the company spent on repurchases in 2019.
Buffett emphasizes that the company only uses stock repurchase programs if it believes that stocks are trading below their intrinsic value.
“We by no means think that Berkshire shares should be repurchased at any price,” Buffett said in the annual letter. ‘I emphasize this because US CEOs have an embarrassment about spending more company funds on repurchases when prices have risen than when it has fueled. Our approach is exactly the opposite. ‘
Berkshire’s operating income, which Buffett urged shareholders to concentrate on, rose to $ 5.02 billion during the fourth quarter, from $ 4.42 billion in the same period a year earlier. For the full year, operating earnings fell 9% to $ 21.922 billion as the pandemic hit Berkshire’s conglomerate of businesses.
The company’s net earnings – which account for Berkshire’s large investments in the public market – rose 23% year-on-year to $ 35.835 billion. For the full year, however, net earnings fell 48% to $ 42.521 billion.
Berkshire Hathaway’s Class A shares reached a new high on Thursday, after rising 52% from the March 23 low. For the year, the share rises by about 5%, which is better than the 2% profit of S&P 500.
Even after the Berkshire record in 2020, the company still has a significant cash pile of $ 138 billion. The figure drops from $ 145.7 billion at the end of the third quarter.
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