Berkshire Hathaway (NYSE: BRK-B)(NYSE: BRK-A) Chairman and CEO Warren Buffett knows one thing or another to invest in, to put it mildly. His investment ability has helped the Berkshire share grow at an average rate of 20% annually between 1965 and 2019, or a total of 2,744,062%. This wiped out S&P 500 the return of the index over the same time frame. The popular index increased by 19,784% (including reinvested dividends) during this period.
With such an amazing track record, it’s worth checking out what Oracle of Omaha’s conglomerate buys the most. Fortunately, Buffett̵
Buffett has just bought $ 9 billion more of this stock
In an application to the Securities and Exchange Commission released earlier this month, Berkshire Hathaway revealed that it bought an incredible $ 9 billion of its own stock in Q3 – more than the company has ever spent on buying the stock back in a single year.
Buffett’s move to spend billions on buying Berkshire shares expands the famous investor’s growing bullishness on the stock. The company has steadily increased its buybacks recently. In the first and second quarters of 2020, Berkshire repurchases amounted to $ 1.7 billion, respectively. And $ 5.1 billion.
For a context of how aggressive Buffett’s recent buyback of Berkshire shares is, note that the company only spent $ 4.9 billion. Dollars on share repurchases in 2019. Even more, Berkshire now spends more money buying back its own stock than any other listed company without it Apple (NASDAQ: AAPL). Of course, the technology company has a market value that is four times the size of Berkshire, and collects $ 73 billion in free cash annually, so it’s pretty easy for the iPhone maker to spend more than Berkshire.
Are you going to buy too?
When Buffett aggressively buys back Berkshire shares, it means he believes stocks are undervalued relative to their long-term outlook. Unlike some companies that implement a stock repurchase program without considering what the stock price is trading at the time, Buffett and his investment partner Charlie Munger only buy the stock back when they think they are getting a good deal.
“If the price-to-value rebate (as we estimate it) expands, we are likely to become more aggressive in buying stocks,” Buffett said in Berkshire’s latest annual letter to shareholders. “However, we will not support the stock at any level.”
Buffett stressed in the same shareholder letter that he is not interested in buying the stock back with a small discount. The price must be meaningfully underestimated before Berkshire trades. “Calculations of intrinsic value are far from accurate,” the CEO explained. “Therefore not either [Charlie or myself feel] anyone in a hurry to buy an estimated $ 1 value for a very real 95 cents. “
As Buffett buys record amounts of Berkshire shares, he is likely to be unusually bullish on the company’s shares right now.
Of course, investors should only buy Berkshire shares because Buffett is an aggressive buyer; they should take the time to conduct their own due diligence. Still, Buffett seems to be on to something. Based on the stock’s conservative valuation of 20 times the free cash flow and the quality of the company’s underlying assets – from its $ 113 billion stake in Apple to its massive insurance business – the Berkshire stock looks like a good investment opportunity for investors willing to to have shares in the long run.