For yet another quarter, Warren Buffett’s Berkshire Hathaway has spent more money on buying back its own shares than buying shares in listed companies in the US or elsewhere.
The September quarterly report from the company on the weekend in fact confirms that Buffett continues to find his company a better investment than anything in the stock market.
Berkshire revealed that said it bought $US7.6 billion of its own shares in the third quarter.
That took the total of share buybacks to share repurchases boosted total buybacks to $US20.2 billion this year, compared to $US24 billion in 2020 and to $US45 billion since the end of 2019.
Analysts say Berkshire’s share count fell further last month, suggesting it repurchased another $US1.7 billion of its own stock. That puts it on track to hit a new high by the end of the year.
Berkshire ended September with a record $US149.2 billion of cash and equivalents, and sold about $US2 billion more stock than it bought in the quarter.
After being ahead of the S&P 500 for the first half of this year, Berkshire’s share price has fallen behind the S&P 500 which is up just over 25% while Berkshire shares are up 24% (to last Friday).
That was due to the strong performance by the S&P 500 since September 30 in rising more than 9% against Berkshire’s 5.4% rise.
Berkshire’s third-quarter operating profit rose 18% to $US6.47 billion from $US5.48 billion in the year-earlier period.
Net profit (what we would call statutory profit, which includes one offs such as unrealised share price gains and losses) fell 66% to $US10.3 billion, from $US30.1 billion, reflecting lower unrealised gains on Berkshire’s common stock holdings including Apple, Coca Cola, Amex and Bank of America.
Looking at the operating performance of the business, Berkshire said many of its businesses has benefited from the economic recovery as demand started to return to pre-pandemic levels. But the benefits were not as strong as in the June quarter and scattered.
Profits at Berkshire’s operating businesses, which include BNSF as well as a variety of manufacturing and retail businesses saw an 18% rise in income from a year ago.
That was much less than the 40% jump that some market analysts had forecast, and slower than the 21 increase in profits those operating businesses had in the second quarter.
Berkshire reported nearly $US800 million in losses from insurance underwriting, as claims from bad weather, including Hurricane Ida in late August, increased.
Premiums at motor insurer, Geico (the second biggest in the US) rose in the quarter but losses from accident claims rose even more as drivers returned to the roads. It also noted that the average claims were higher because of “the increase in the valuation of used vehicles.”
In its railroad business, Berkshire said shipping volumes rose 4.4% in the third quarter, showing the economy’s continued growth. But fuel costs rose nearly 80%, capping earnings for the quarter.
Like so many other businesses in the third quarter, Berkshire said it was affected by “ongoing global supply chain disruptions” as well as higher prices for raw materials.
“While consumer demand for products remained high, earnings in the third quarter of 2021 were sequentially lower than the second quarter,” Berkshire commented.
“Several of our businesses experienced higher material, freight and other input costs attributable to ongoing disruptions in global supply chains.”
