Warren Buffett during an interview with CNBC’s Becky Quick on February 24, 2020. It turned out to be another year in which the billionaire investor eschewed game-changing takeovers in a pricey market, even after a sudden market cash and as his company has a huge cash balance.
Gerald Miller | CNBC
As the 2020 coronavirus pandemic devastated markets, Warren Buffett’s Berkshire Hathaway bought back a record amount of company stock. And the buying wave has continued into 2021, according to the conglomerate’s annual letter released Saturday morning.
During the fourth quarter, the company repurchased approximately $ 9 billion worth of Berkshire stock, bringing the 2020 total buyback to a record high of $ 24.7 billion.
“Berkshire has bought back more shares since the end of the year and is likely to further reduce the number of shares in the future,” said its annual letter.
In the third quarter, the conglomerate bought back $ 9 billion in its own shares, up from $ 5.1 billion in the second quarter. The numbers are comparable to the $ 5 billion the company spent on buybacks in 2019.
Buffett stressed that the company will only participate in share buyback programs if it believes that shares are trading below their net asset value.
“We do not believe in any way that Berkshire stock should be bought back at any price,” Buffett said in the annual letter. “I emphasize that point because US CEOs have an embarrassing track record of spending more assets on buybacks when prices have gone up than when they have been fueled. Our approach is the exact opposite.”
Berkshire operating income, which Buffett is urging shareholders to focus on, was $ 5.02 billion in the fourth quarter, compared to $ 4.42 billion in the same period a year earlier. For the year, corporate earnings fell 9% to $ 21.922 billion as the pandemic hit the conglomerate of Berkshire businesses.
The company’s net profit – which explains Berkshire’s large investments in the public market – rose 23% year-over-year to $ 35.835 billion. However, for the full year, net income fell 48% to $ 42.521 billion.
Berkshire Hathaway’s Class A shares hit a new all-time high on Thursday, after a 52% rise from the March 23 low. For the year, the stock is up about 5%, better than the S&P 500’s 2% gain.
Even after Berkshire’s record buying in 2020, the company still has a significant cash stack of $ 138 billion. The figure is down from $ 145.7 billion at the end of the third quarter.
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