Why Warren Buffett May Have Changed His Tune On Berkshire Buybacks

Why Warren Buffett May Have Changed His Tune On Berkshire Buybacks

Legendary Berkshire Hathaway Inc. (NYSE: BRK-A)(NYSE: BRK-B) CEO Warren Buffett took some heat at Berkshire’s annual shareholder meeting in May for not being aggressive enough in using the company’s massive cash pile to buy back shares of Berkshire stock.

Buffett finally pulled the trigger on a major natural gas acquisition earlier this month, and there's evidence he has been scooping up shares of Berkshire as well.

Just weeks after Berkshire made a $10 billion purchase of Dominion Energy Inc D natural gas assets, The Rational Walk investing blog pointed out a recent Berkshire filing suggests Berkshire has been buying back large amounts of stock since the shareholder meeting.

The Numbers

Berkshire submitted a new filing with the SEC on July 8 stating that Buffett owned 248,734 Class A Berkshire shares and 10,188 Class B shares as of the filing date. By converting the Class B shares to Cass A equivalents, The Rational Walk estimates Buffett holds 248,740.8 total Class A equivalents as of July 8.

That same filing said Buffett’s ownership stake in Berkshire was 15.54% By dividing 248,740.8 by 0.1554, The Rational Walk calculated there were 1,600,649 total Berkshire Class A equivalent shares as of July 8. The company’s last quarterly 10-Q filing said there were 1,620,023 Class A equivalent shares of Berkshire as of the end of the first quarter.

In other words, Berkshire may have bought back and retired 19,374 Class A equivalent shares since the end of the first quarter, potentially representing roughly $5.2 billion in buybacks.

“It seems likely that Buffett’s views of the range of possible economic outcomes related to COVID have narrowed somewhat, and that he might view the very worst outcomes as less likely than he did when he spoke at the annual meeting on May 2,” The Rational Walk wrote in its blog post.

Investors won’t know for sure how much stock Berkshire has been buying back until the company’s next 10-Q filing in early August.

Benzinga’s Take

It would make sense that Buffett sees less risk in the economy and the market today given things have somewhat stabilized despite rising COVID-19 cases. Buffett seemed extremely cautious during his annual meeting commentary, but his Dominion purchase is just the latest example of Buffett’s willingness to quickly change strategies as market conditions evolve.

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