Warren Buffett, CEO and President of Berkshire hathaway (NYSE: BRK.B)(NYSE: BRK.A), is one of the biggest investors of all time. Its ability to select stocks and identify undervalued subsidiaries to be acquired by Berkshire has helped the company’s share price to grow at an average rate of about 20% annualized since 1965 – approximately doubling the S&P 500annualized return over the same period. No wonder investors watch carefully when the famous investor takes a step.
While we don’t have all the details on Buffett’s recent purchases until the company releases its 13-F record this week, one thing is clear: Berkshire Hathaway itself is among Buffett’s favorite stocks at buy recently – and it might even be his top pick.
Spend billions on Berkshire stocks
Although Berkshire has yet to disclose all of its first quarter stock purchases, the company provided an update on its share buybacks in its recently released quarterly report. The conglomerate bought back about $ 1.58 billion of its own shares during the quarter. This is a large purchase compared to the company’s total purchases during the period. In total, Buffett spent about $ 4 billion to buy stocks in the first quarter. This means that Berkshire accounted for approximately 40% of all share purchases during the period.
Coming home of how much more attractive Berkshire is to find its own stocks to buy than other stocks, Berkshire was also by far the company’s largest stock purchase in the fourth quarter. During the period, Berkshire spent $ 2.2 billion to buy back its own stocks – more than all of its other stock purchases combined in the quarter. In addition, this brought the total buybacks in 2019 to around $ 5 billion, compared to just over $ 1 billion in 2018.
To be clear, it’s possible that Berkshire spent more than $ 1.58 billion on something other than Berkshire in the first quarter. But it is unlikely since Berkshire spent only $ 4 billion in total to buy titles. However, considering this purchase with the $ 2.2 billion spent by Berkshire on first-quarter buyouts, Berkshire seems to be Warren Buffett’s favorite title lately.
Berkshire stocks appear to be undervalued
What is remarkable about Berkshire’s share buybacks is that they really mean something. Unlike many companies that buy back stocks, no matter where the stock is traded, it is Buffett’s policy to only buy back stocks when it believes they are significantly undervalued. The fact that Berkshire was one of the main stock purchases speaks volumes about Buffett’s vision for Berkshire shares.
To this end, the carrying value of Berkshire shares is significantly lower than it has been for years. In fact, the last time Berkshire had a price-to-book value of less than 1.2 was the start of 2013. Today, Berkshire has a price-to-book ratio of about 1.1.
While this ratio offers only one view of Berkshire’s stocks, the main one remains: Buffett clearly sees significant value in the shares of his own business. In fact, its buying history in the past two quarters suggests that it may be the favorite stock of the famous investor.