Berkshire Hathaway halts stock buybacks, raises cash

Warren Buffett’s Berkshire Hathaway did not buy back any of its own stock in the third quarter. This suggests that the CEO might think his company is overvalued. Berkshire Hathaway has over $325 billion in cash on hand.

Live view of Warren Buffett and Berkshire Hathaway $BRK cash position.
Now $325.2B. pic.twitter.com/G0pkjpSm7n

— Sven Henrich (@NorthmanTrader) November 2, 2024

The company ended a six-year-long streak of stock buybacks, according to recent SEC filings. Berkshire was a net seller of stocks across its portfolio that quarter. It increased its cash holdings to record amounts.

Even when you adjust Berkshire Hathaway's cash down to the more accurate figure of $305-310 billion, it's still higher than the tower of selected company valuations that @chartrdaily built here. pic.twitter.com/yuevit7gtb

— Kevin Carpenter (@kejca) November 4, 2024

Analysts say Berkshire Hathaway’s actions signal that its stock might be overvalued.

Morningstar's Greggory Warren maintained his fair value estimates for Berkshire Hathaway after Q3 2024 results.$BRK.A: $700,000$BRK.B: $467

From 2014-2019, Warren was selected to serve on the analyst panel at Berkshire AGMs.

— Kevin Carpenter (@kejca) November 3, 2024

That Berkshire Hathaway did not repurchase any shares would lead most people to say, ‘Well, if they’re not buying back their stock, why should I?'” stated Cathy Seifert, an analyst at CFRA Research. Buffett has consistently said that he will only repurchase shares when he believes they are trading below intrinsic value. Berkshire’s Class A stock is currently trading at about 1.6 times its book value.

Berkshire increases cash, avoids buybacks

In the past, the company has indicated it would not buy its stock if it traded above 1.2 times book value. Shares of Berkshire Hathaway’s Class A closed at $664,750 on Monday. They are up about 21% year-to-date, slightly outpacing the S&P 500’s 20% gain over the same period. He’s been very clear that they would never buy back shares if they thought that the firm was overvalued,” noted Robert Korajczyk, a professor of finance at Northwestern’s Kellogg School of Management. Aswath Damodaran, a professor of finance at NYU Stern School of Business, suggested that Berkshire’s cautious stance might reflect their perception that the market is currently richly priced. Berkshire Hathaway’s decision suggests Buffett is cautious about the state of the market and the overall economic backdrop. All this suggests that Buffett has serious concerns about the economic backdrop and the current state of the stock market. It implies a risk-off mentality and the hallmarks of an investor who is prepared to sit and wait for a better entry point,” mentioned Russ Mould, an analyst at AJ Bell. As Berkshire Hathaway continues to amass cash, it implies that Buffett doesn’t see any compelling investments at the moment. The company’s cash holdings increased to $325.2 billion from $276.9 billion in June. “If they don’t have alternatives that are good buys at this point, it makes sense to sit in cash and wait until the market corrects and then make purchases after that point,” explained Korajczyk.