Warren’s Buffet of Buybacks

The Oracle of Omaha has spoken. Warren Buffet, the 90-year-old CEO of Berkshire Hathaway, announced on Saturday that net profit rose nearly 23% in 2020 on the year to $36 billion, or $23,015 per class A share. “I Paid Too…

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The Oracle of Omaha has spoken.

Warren Buffet, the 90-year-old CEO of Berkshire Hathaway, announced on Saturday that net profit rose nearly 23% in 2020 on the year to $36 billion, or $23,015 per class A share.

“I Paid Too Much”

Importantly, accounting rules require Berkshire to report changes in the value of its investments in companies such as Apple, Coca-Cola, and Verizon — creating swings in operating results.

Let’s dive into what else happened at Berkshire:

Buyback City: In his annual written address to shareholders, Buffett revealed his company repurchased a mammoth $25 billion in class A shares, the business equivalent of retweeting yourself:

  • Buffett said the buybacks were conducted to “enhance the intrinsic value per share for continuing shareholders” while ripping companies who repurchase stock “at simply any price,” calling them “embarrassing.”
  • In making the announcement, he quoted the classic American actress Mae West, who he called “sultry”: “Too much of a good thing can be…wonderful,” she once said.

Oops: Buffett did concede he overpaid for Precision Castparts, which he acquired for $37.2 billion five years ago, leading to a $10 billion writedown last year. “PCC is far from my first error of that sort. But it’s a big one,” he said.

“Disappointing:” Surprising to some, Buffett’s letter made only one passing reverence to the Covid-19 pandemic — one of the most significant economic events in history which had mammoth impacts on Buffett’s portfolio. Cathy Seifert, an analyst at CFRA Research, said. “that to me was striking. It was tone deaf and it was disappointing.”

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