For the first time in the more than 50 years history of Berkshire Hathaway (BRK), CEO Warren Buffet was aggressively repurchasing shares of his own company on such a large scale in 2020 and 2021. When the world’s greatest stock market investor in history is buying billions of dollars’ worth of stock in his own company, which he knows better than anyone else, you can’t get a better buy signal.
BRK is one of the safest and most conservatively managed companies on the stock market. Additionally BRK Berkshire Hathaway does relatively well during difficult market conditions.
After repurchasing $24 billion worth of Berkshire stock in 2020, Buffett followed that up with another $27 billion worth in 2021. In comparison, Buffett spent only $8 billion on buying shares of other publicly traded companies in 2021. He actually sold $16 billion worth of other stocks in 2021. That made him a net seller.
The stock had a great run but Buffett’s repurchases have taken place when BKR was trading around 1.25 x book value. With the strong start to 2022, the company is now trading at 1.56 x book value. Historically, Buffett has not been repurchasing BKR shares at such valuation. If Berkshire’s valuation stays above 1.5 times book value, Buffett will likely stop share buybacks entirely because the company is getting close to be fairly valued.
At this point, BRK might not be a buy. It might be wiser to look at it again when the stock drops close to 1.25 x book value again. Bet, Buffet will be back to buy his own shares again?
Sven Franssen