As the coronavirus pandemic rocked markets in 2020, Warren Buffett’s Berkshire Hathaway bought back a record amount of company shares. And the buying frenzy continued until 2021, according to the conglomerate’s annual letter published on Saturday morning.
During the fourth quarter, the company repurchased approximately $ 9 billion of Berkshire shares, bringing the total buyback in 2020 to a record $ 24.7 billion.
“Berkshire has repurchased more shares since the end of the year and is likely to further reduce its number of shares in the future,” said its annual letter.
In the third quarter, the conglomerate repurchased $ 9 billion of its own shares, up from $ 5.1 billion in the second quarter. The numbers compare to the $ 5 billion the company spent on buybacks in 2019.
Buffett pointed out that the company only engages in share buyback programs when it believes the shares are trading below their intrinsic value.
“In no case do we believe that Berkshire shares should be repurchased at any price,” Buffett said in the annual letter. “I emphasize this point because US CEOs have an embarrassing track record of spending more company funds on buyouts when prices have risen than when they have fallen. Our approach is exactly the opposite. “
Berkshire’s operating profit, which Buffett urges shareholders to focus on, was $ 5.02 billion in the fourth quarter, up from $ 4.42 billion in the same period a year earlier . For the year as a whole, operating profit fell 9% to $ 21.922 billion as the pandemic hit the Berkshire business conglomerate.
The company’s net profit – which explains Berkshire’s big investments in the public market – jumped 23% on an annual basis to $ 35.835 billion. For the full year, however, net income slipped 48 percent to $ 42.521 billion.
Berkshire Hathaway Class A shares hit a new all-time high on Thursday, having rebounded 52% from the March 23 low. For the year, the stock rose about 5%, surpassing the S&P 500’s 2% gain.
Even after Berkshire’s record-breaking 2020 buyout, the company still has a significant cash flow of $ 138 billion. That figure is down from $ 145.7 billion at the end of the third quarter.