The latest trading of "Stock God" sends a significant signal.
The latest released document shows that Berkshire Hathaway, led by Buffett, is accelerating its share buyback. On March 18th local time, Barron Weekly reported that Berkshire Hathaway purchased company stocks worth $2.3 billion (approximately RMB 16.6 billion) in the first quarter ending March 6th.
Analysts point out that Buffett's massive cash reserves and increased repurchase efforts seem to indicate that it is difficult to find satisfactory investment targets. Buffett once bluntly stated, "The current US stock market is more like a casino than when I was young.". According to the financial report, as of the end of 2023, the total amount of cash and equivalents on the company's books reached $167.6 billion (approximately RMB 1206.1 billion).
So, does it mean that Buffett has sensed the hidden risks in the US stock market? Will its repurchase action be further intensified?
Buffett's move
The latest released documents show that Berkshire Hathaway, led by Buffett, is accelerating its share buyback, despite the company's stock price reaching a historic high. This indicates that Warren Buffett, who has long served as the chairman of the company, believes that Berkshire's stock value is still undervalued and a "good place" to consume its increasingly inflated cash flow.
On March 18th local time, Barron Weekly reported that Berkshire Hathaway purchased company stocks worth $2.3 billion (approximately RMB 16.6 billion) in the first quarter ending March 6th.
According to Berkshire's 10-K filing with the U.S. Securities and Exchange Commission, buybacks in the first quarter of this year were mainly concentrated between February 13th and March 6th.
It is worth noting that during this period, the average price of Berkshire's A-class stocks was about $612000, and even set a historical high of $647000 per share.
As of the latest close, Berkshire's A-share price was at $617880, with a cumulative increase of 13.87% over the year, almost twice the increase of the S&P 500 index during the same period.
Barron Weekly stated that the strengthening of stock buyback activities may mean that Berkshire's buyback amount in the first quarter of this year will reach $3 billion or more, higher than the $2.2 billion in the fourth quarter of last year.
Based on recent trading prices, the price of Berkshire's stock buyback is not cheap, about 1.6 times the book value at the end of 2023, while the average book value in recent years has been close to 1.4 times.
According to reports, recent repurchase activities have mainly focused on Berkshire's A-class stocks with super voting rights. By repurchasing A-shares, it is beneficial for Buffett to retain his voting control over the company, although his economic interests decline as he continues to donate stocks.
Buffett holds 15% of the company's shares, but his voting rights amount to 31%, as almost all of his holdings are A-class stocks.
What signal?
Buffett, who is now 93 years old, has been in charge of Berkshire, headquartered in Omaha, since 1965 and is responsible for overseeing buybacks and other major capital allocation decisions.
A large-scale repurchase can help Buffett allocate Berkshire's increasingly inflated cash. According to the financial report, as of the end of 2023, the total amount of these cash and equivalents has reached $167.6 billion (approximately RMB 1206.1 billion).
Analysts point out that Buffett's massive cash reserves and increased repurchase efforts seem to indicate that it is still difficult to find satisfactory investment targets at the moment.
Buffett even bluntly stated in his letter to shareholders, "For whatever reason, the current market is more like a casino than when I was young. Casino now exists in many families, tempting residents every day."
In the absence of attractive alternative investment options, it is highly likely that Buffy will continue to insist on giving back to shareholders through stock buybacks. In the future, Berkshire's buyback efforts may further increase.
According to statistics, Berkshire repurchased a total of $9.2 billion (approximately RMB 66.2 billion) in company stocks throughout 2023; 2021 was the peak period for Berkshire's buybacks, with a total buyback amount of $27 billion (approximately RMB 194.3 billion).
Berkshire announced in its annual report released in February that it will maintain a cash buffer of $30 billion, and "financial strength and ample liquidity will always be the most important.".
It is worth mentioning that against the backdrop of Berkshire's stock price continuing to rise this year, the action of the "stock god" to accelerate the pace of stock repurchases may indeed be a good choice.
Steve Hanke, a renowned American economist and professor of applied economics at Johns Hopkins University, said that Buffett's current large cash reserves indicate that he is not optimistic about the outlook for the US stock market and expects the US economy to fall into trouble.
Hank believes that Buffett and his team are clearly struggling to find convincing acquisition targets and hope to have enough gunpowder to deploy during a sharp drop in stock market valuations.
"This high cash reserve tells us something important: Buffett believes there isn't much worth buying, and in this situation, cash is king," Hank said.
The successor is about to appear
The shareholder meeting to be held in May this year will be Berkshire's first shareholder meeting since the death of Charlie Munger, Berkshire's vice chairman and long-term investment partner.
The market is paying close attention to the upcoming new guests on stage. Buffett previously revealed in a letter to shareholders, "At Berkshire's annual gathering on May 4, 2024, you will see three managers who now bear the primary responsibility of leading the company."
The three individuals mentioned in the letter include Buffett, Greg Abel, and Ajit Jain. Among them, Jay is responsible for Berkshire's insurance business, and Abel is responsible for supervising non insurance business.
In the shareholder letter, Buffett clearly emphasized that Greg Abel is the successor to Berkshire. "Greg Abel is responsible for all of Berkshire's non insurance businesses, and from all aspects, he is ready to become Berkshire's CEO tomorrow," Buffett said.
In November last year, Buffett announced his will arrangement, stating that his life had entered "overtime". It was rare to mention that the company's successor had also been arranged, stating that Berkshire Hathaway had a "suitable CEO" and a "suitable board of directors" to succeed him, but the specific candidate was not explicitly announced at the time.
The Wall Street Journal praised Abel as a "shrewd trader". Buffett once said that he receives many phone calls every day, "But when Greg calls, I always make time for him because he always brings me great ideas, and his thinking and business methods are innovative."
Buffett gave high praise and expectations for Abel's succession. He said that shareholders do not need to worry about the company's future, as Abel will do very well. Such trust and support are undoubtedly the best affirmation of Abel's ability and character.