📈 Did Warren Buffett Find His Next “Value Investment”?

Berkshire Hathaway is on a buyback spree

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Monday Close) 3,550.50 +41.06 (1.17%)

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Did Warren Buffett Find His Next “Value Investment”?

Berkshire Hathaway repurchased over $9B of its stock in Q3, taking the overall number to $16B for the year.

Background: Warren Buffett and Charlie Munger need no introduction. A couple of years ago, Berkshire authorized a buyback of its shares at any time chairman Warren Buffett and vice chairman Charlie Munger felt the stock is trading for a discount.

In search of an “elephant-sized” deal, Berkshire has invested in Japan’s five leading trading companies: Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co., and Sumitomo Corp. Later in September, the company participated in Snowflake’s IPO, investing $735M and notching up almost an $800M gain. During the pandemic, Berkshire sold its stake in major US airlines.

It seems like Warren Buffett might have just spotted that his next “elephant-sized” deal.

What Happened?: The $16B buyback is more than triple its last annual record. This amount eclipses Berkshire’s investment in Occidental Petroleum in 2019. It’s more than what the company has ever spent in a year purchasing its favorite stock – Apple.

The Wall Street consensus of $3.2B in buyback in Q3 turned out to be nowhere near the actual numbers.

The company reported an operating profit of $5.47B, down 32% from the year before. But Berkshire’s net earnings, which account for the company’s investments in the market, surged 82% on a Y-o-Y basis to $30.13B.

Buffett’s repurchase spree comes amid a tough time for its operations as the global economy struggles to recover from the coronavirus, directly impacting its wholly-owned businesses, including railroads, utilities, and insurance.

Even after the jumbo-sized repurchase, Berkshire reported cash reserves of $145.7B. If Buffett and his team think the stock is a bargain, this buyback won’t be the last.

Market Reaction: Berkshire Hathaway’s Class A shares are up nearly 20% in the Q3. However, the stock is still widely underperforming the S&P500 index this year. The stock has lost 8%, compared to a 10% total return for the S&P500.

Company Snapshot 📈

BRK.B $221.50 +12.65 (6.06%)

Analyst Rating (6 Ratings) BUY 50%  HOLD 50%  SELL 0%

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Fun Fact of The Day 🌞

If you search for “askew” in Google, the content will tilt slightly to the right.

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