New record: Cash reserves show: Buffett’s Berkshire Hathaway has too much money and too few investment opportunities | news

—?? Berkshire Hathaway cash reserves hit new record
?? Third quarter share buybacks of $ 7.6 billion
?? Some analysts disappointed

The business of Warren Buffett’s investment holding Berkshire Hathaway benefited in the third quarter of 2021 from the fact that many businesses continued to recover from the setbacks at the beginning of the pandemic. However, interruptions in the supply chains and higher costs for materials and freight ensured that operating profit rose by only 18 percent to 6.47 billion US dollars, which, according to “Reuters”, was not quite as strong as had been expected by some experts. Berkshire’s net income, on the other hand, fell 66 percent to $ 10.3 billion, according to the annual report released on Saturday. The reason given here is lower profits from equity investments.

But there are other numbers that are currently attracting attention. Because the annual report also shows that the Buffett Holding has too much money and finds too few opportunities to invest it sensibly. For example, Berkshire Hathaway sold significantly more shares than bought it in the third quarter due to high market valuations. According to “Reuters”, the value of all shares sold exceeds that of the shares bought by around 1.95 billion US dollars. There were also no major deals in the last few quarters. As a result, Berkshire Hathaway’s already huge cash reserves continued to grow and now hit a new record at the end of September.

Berkshire with record cash despite share buybacks

At the end of the third quarter, Berkshire Hathaway’s cash holdings rose to $ 149.2 billion – from $ 144.1 billion in the second quarter of 2021 – beating the previous record of $ 146.6 billion from the last year. “The cash is now approaching $ 150 billion. That was certainly unexpected earlier this calendar year,” Edward Jones’ analyst Jim Shanahan told Bloomberg, describing the swelling cash reserves as “somewhat disappointing.” “I would have thought they would be able to get this deeper through a combination of investments, takeovers and buybacks,” the expert continued.

The question of why Warren Buffett did not take action during the corona pandemic when many companies were very cheap in order to at least reduce their cash holdings must remain open. In the case of the share buybacks mentioned by Shanahan, Berkshire Hathaway by no means remained idle – however, despite the billions invested, this did not significantly contribute to the reduction of its cash reserves. According to the annual report, Berkshire Hathaway bought back its own shares for 7.6 billion US dollars in the third quarter. For the full year to date, $ 20.2 billion has been used for share buybacks. The investment holding is well on the way to surpassing the previous record of a total of 24.7 billion US dollars for share buybacks from last year. Because as “Bloomberg” reports with reference to SEC documents, Berkshire Hathaway bought again between the end of September and October 27 of its own shares for 1.7 billion US dollars.

Share buybacks as Berkshire’s next big deal

A comparison also shows just how huge the share buyback business has been at Berkshire Hathaway in the recent past. Because, as “Bloomberg” writes, Warren Buffett has spent significantly more on share buybacks since mid-2018 than on building up Apple’s position in the Berkshire portfolio. The oracle of Omaha has invested around 51 billion US dollars in buying back its own shares since 2018, but spent “only” 31 billion US dollars on Apple shares between 2016 and the end of 2020, the value of which is now in the range due to the share price development of 121 billion US dollars.

In addition to the record high cash reserves, the share buybacks are an indication that Warren Buffett lacks investment opportunities. “Reuters” interprets the latest buyback program to the effect that the star investor sees more value in his own company than in others. Analyst Jim Shanahan thinks the share buybacks are “okay” and, according to the news agency, expressed the hope that there will be more buybacks in the future. Because he sees “not much evidence that they let the money work for them”. “Buying back Berkshire shares makes sense when you’re drowning in cash,” said Empire Financial Research analyst Whitney Tilson to Bloomberg. “If Buffett could find another Apple, I would of course prefer he would [das Geld] allocate there “, he restricted.

Cathy Seifert, an analyst at CFRA Research, painted a more differentiated picture than “Bloomberg”. “In the cops case, they would be said to be [2021] bought back their own shares valued at US $ 20 billion because they are confident about their future prospects and that it should be the catalyst for the stock, “said the expert. The bear case, however, is that Berkshire Hathaway is a company The company said that it was necessary for its business to make additional acquisitions and that the investment holding company was unable to do so, but Seifert sees another possibility in 2022, according to Reuters, according to Reuters Consider a takeover, because the company will not stand on the sidelines forever.

Finanzen.net editorial team