Berkshire Hathaway (BRK) third quarter 2020 results

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Warren BuffettGerard Miller | CNBC

As the coronavirus pandemic weighs on its operating income and share price, Berkshire Hathaway stepped up its third quarter share buyback program even further, nearly doubling the record second quarter buyback.Warren Buffett’s conglomerate bought back $ 9 billion of its own stock, it was revealed in its third quarter earnings report on Saturday. That’s up sharply from the $ 5.1 billion second-quarter level that turned heads when it was announced and brings Berkshire’s total buybacks to $ 15.7 billion for 2020.

Berkshire repurchased more than $ 2.5 billion in Class A shares and approximately $ 6.7 billion in Class B shares during the quarter. This upended UBS’s estimate for a total quarterly buyout of just $ 3.2 billion.

Buffett’s buyout spree comes amid a tough time for its operations as the global economy struggles to recover from the coronavirus, which has a direct impact on the company’s wholly-owned operations, including railways, utilities and insurance.

Berkshire said its operating profit was $ 5.478 billion, down more than 30% from the period a year earlier. But the company’s net profit – which explains Berkshire’s big investments in the public market like Apple – soared more than 82% on an annual basis to $ 30.137 billion.

Apple, Berkshire’s largest stock market, rose more than 26% in the third quarter. Coca-Cola gained 10.5% during this period. Although Buffett cautioned investors not to pay attention to these net profits because the investment gains are unrealized and volatile.

Does Buffett think the stock is cheap?

In his annual letter released earlier this year, Buffett discussed when he and Berkshire Vice President Charlie Munger would decide to repurchase shares.

“Our thinking, summarized: Berkshire will only buy back its shares if a) Charlie and I believe it is selling for less than it is worth and b) the company, once the buyout is complete, is left with sufficient liquidity”, said Buffett wrote. “Over time, we want the number of Berkshire shares to decrease. If the price-to-value discount (as we have estimated it) widens, we will likely become more aggressive in buying stocks. However, we will not be backing the title at all. level. ”

Buffett also defended the practice in general at the Berkshire annual meeting in May.

“When the conditions are right, it should also be obvious to buy back shares and there shouldn’t be any taint, neither should dividends,” he said.

Despite a nearly 20% return in the third quarter of Berkshire Hathaway’s class A shares, the stock is still significantly underperforming the S&P 500 this year. The share lost 8%, compared to a total return of 10% for the S&P 500.

Buffett’s redemption frenzy comes as the Oracle of Omaha has made relatively few big moves this year. At the end of August, Buffett announced that Berkshire had acquired stakes of at least 5% in the five main Japanese trading companies: Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. other major acquisitions this year.

Even after record buyouts this year, Berkshire’s cash position still stands at $ 145.7 billion through the end of the third quarter.

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