Berkshire bought back record $5bn of stock last quarter

Suggesting Warren Buffett’s thinking shifted.

Warren Buffett’s Berkshire Hathaway Inc. spent a record $5 billion buying back Berkshire’s own stock in the second quarter.

Berkshire’s Class A shares, which fell in line with the S&P 500 in the first three months of the year as the pandemic spread in the U.S., fell another 1.7% last quarter while the broader index rallied 20%.

Buffett said in May that repurchases weren’t more compelling, but the buybacks in the quarter suggest his thinking shifted.

Key insights

• Even with buybacks that more than doubled the previous quarterly record, Berkshire’s cash pile kept growing and hit $146.6 billion. Buffett has struggled to find ways to deploy large chunks of funds into higher-returning assets.
• Berkshire ended up taking a more cautious approach to the broader stock market in the quarter. He sold a net $12.8 billion of shares in the quarter, including dumping his airline holdings in April.
• Berkshire’s businesses felt the sting of the fallout from the pandemic, with operating profit slumping 10% in the second quarter. The company also took $10 billion of impairment charges related to its Precision Castparts unit, which has been hit by the slump in air travel amid the pandemic.
• Unrealised gains and losses in Berkshire’s massive stock portfolio count toward the bottom line. So the S&P 500’s rally in the second quarter pushed net income to $26.3 billion.

© 2020 Bloomberg L.P.