A week ago, investors eagerly awaited the publication of Berkshire hathawaythis is (NYSE: BRK.B) (NYSE: BRK.A) last 13F deposit with the Securities and Exchange Commission. The quarterly report reveals changes in the company’s equity portfolio, giving investors a taste of what famed Berkshire investor and CEO Warren Buffett recently bought and sold.
Investors were particularly anxious to see Berkshire’s latest 13F file, as it covers a period during which stocks collapsed. The global market is still down more than 15% from its historic peak this year. Berkshire’s share purchases during the period could therefore reveal great buying opportunities for investors while the market is still falling sharply.
However, it turns out that there were no significant purchases during the quarter, except for the one on which the company had already revealed that it had spent nearly $ 1.6 billion. : his own stock of Berkshire Hathaway.
Warren Buffett’s Best Buy
Since the company’s quarterly results were released on May 2, investors already knew that Berkshire was a net buyer of shares in the first quarter. But its total purchases (excluding purchases of its own inventory) only exceeded inventory sales in the quarter by $ 1.8 billion. This suggests that the company’s share buybacks during the period of around $ 1.6 billion were likely the largest single share purchase made by Berkshire during the period – and Friday’s 13F record has shown that to be true.
Berkshire’s notable purchases during the quarter consisted of purchases that increased the company’s holdings in two airline stocks and a slight addition to its PNC Financial Services Group (NYSE: PNC) stake. Thanks to Buffett’s timely comments at the company’s recent annual meeting of shareholders, we know that Berkshire ended up withdrawing all of its stake in the top four airlines after the end of the first quarter. Airlines are therefore clearly not a preferred choice for Buffett at this time. In addition, Berkshire’s addition to its stake in PNC was small compared to its $ 1.6 billion buyout.
The first quarter was not the only time Buffett was betting big on Berkshire stock. In the fourth quarter, the company spent $ 2.2 billion to buy back its own shares – more than it spent on all of its other combined share purchases during the period.
Buffett apparently thinks that Berkshire is the best deal on the market right now.
Stock is an even better buy right now
What is particularly noteworthy is that Berkshire shares are trading at a significant discount compared to the average prices that Buffett bought them in the first quarter. Most of Berkshire’s purchases of its own shares in the first quarter were at prices above $ 200. Today, stocks are trading at around $ 170.
Further emphasizing the cheap share price today, the Berkshire price-to-pound ratio of 1.1 has not been as low since 2012.
Of course, much of Berkshire’s record $ 137 billion cash balance can deliberately stay on the sidelines to provide a bigger buffer for the company’s massive insurance operations in these uncertain times. In addition, Buffett probably keeps dry powder for a potentially large and opportunistic acquisition. But there’s no denying that Buffett’s outsized bet on Berkshire’s own stocks relative to other stocks in the fourth quarter of 2019 and the first quarter of 2020 suggests that he thinks his stocks are a good deal at the moment.