Buffett’s “little trouble”: Too much money and less projects, now it’s hard to buy back

The Financial Associated Press (Shanghai, Editor Qi Lin), for long-term value investor Warren Buffett, the distress that has been troubling him in recent years is: too much money but few investment projects, so he can only put money Used to buy back his own stock, because he believes that at least Berkshire Hathaway is still undervalued. But the latest quarterly report shows that Berkshire’s repurchase volume also declined in the second quarter.

The company’s second quarter report showed that as of the end of June, the company had a total of US$144 billion in cash and cash equivalents, which was a slight decrease from the US$145.4 billion at the end of the first quarter, but it was still at a high level in recent years.

In the second quarter, the company’s stock repurchase scale was US$6 billion, the first quarter was US$6.6 billion, and the previous two quarters were both US$9 billion.

In the case of sufficient funds, the company’s repurchase strategy has not changed. The decline in repurchase volume can only show that there is no more liquidity for repurchase in the market, or the company believes that the current stocks are a bit expensive and deliberately slowed down Pace of repurchase.

Berkshire’s stock rose by nearly 11% in the first quarter, and then rose by 8.5% in the second quarter. In the first half of the year, it rose by 23.7%. The S&P 500 index rose by 18.1% in the same period. In 2019 and 2020, Berkshire’s stock performance lags behind the broader market.

dilemma

In the past two years, Berkshire, which holds a large amount of cash, has basically had no large-scale mergers and acquisitions or investment projects, except for the acquisition of Dominion Energy’s midstream energy business for a total of US$9.7 billion in the middle of last year. Its top four heavyweight stocks have basically remained unchanged (as shown in the figure below). The changes in other heavy stocks in the portfolio are not disclosed in the quarterly report too much. As usual, we have to wait for the 13F report to be released in mid-August.

Note: Source Berkshire quarterly report, unit: 100 million US dollars Buffett mentioned in the shareholder letter that he also hopes to conduct mergers and acquisitions, but for him who upholds the philosophy of long-term value investment, the stock prices of outside companies are also too expensive.

Berkshire, which insists on no dividends, cannot promote the rapid growth of the company’s business through exogenous mergers and acquisitions. It can only use repurchase to return shareholders. But the current situation is that Berkshire’s own stock is also rising, faster than the broader market, and it seems a bit expensive.

“They (Berkshire) have a bit of a dilemma.” CFRA Research analyst Cathy Seifert (Cathy Seifert) said in an interview with the media. “In this context, I think the level of repurchase is prudent and appropriate. of.”