Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
In its Q3 earnings report, Berkshire Hathaway revealed a record-breaking stock buyback of $9.3 billion. With the ongoing market rally, as the coronavirus is on a collision to meet the vaccine, should investors follow suit to mirror Warren Buffett, one of the greatest stock gurus of all time?
Berkshire Hathaway with a Record Buyback
Completing its Q3 2020 with $145.7 billion in cash assets, Berkshire Hathaway is looking strong, based both on stock performance and business operations. Moreover, in light of Pfizer offering a free COVID-19 vaccine within Operation Warp Speed, Berkshire Hathaway gained $35 billion in value on November 9.
The Oracle of Omaha, Warren Buffett himself, presaged this with aggressive, historic Berkshire shares buybacks. In Q2, Buffett repurchased $5.1 billion worth of Berkshire stock, while the Q3 comprised of $9.3 billion worth of company’s stock buyback. Berkshire CEO Warren Buffett and chairman Charlie Munger made this possible by tweaking the buyback policy in 2018, allowing them a greater degree of leeway by eliminating the 120% book value limit.
Does this mean that Berkshire Hathaway is yet to rise still? Quite possibly if we take into account that buybacks happened during the Q3 stock price rise. In all likelihood, more buybacks may be incoming as the stock market reacts to Pfizer’s announcement to distribute the coronavirus vaccine free of charge, as a closure to the pandemic anxiety and its countless negative impacts.
By November 14, you should see the exact details of Berkshire’s stock buying and selling strategy, as it files a Form 13-F with the U.S. Securities and Exchange Commission (SEC).
As a guru of value investing, Buffett is the most quoted living investor, having dozens of books written about him.
Outside of his extreme wealth, currently a $79 billion net worth, Warren Buffett is also a prolific philanthropist and advocate for a wealth tax in numerous forms. Over the last two decades, he has donated $37 billion worth of Berkshire Hathaway stocks to various charities, following through on his Giving Pledge.
“Price is what you pay. Value is what you get.”
Together with his close friend and fellow billionaire, Bill Gates, Buffett founded the nonprofit Giving Pledge to encourage the ultra-rich to depart with at least half of their wealth. Looking at Buffett’s life story, it’s not that surprising he ended up being one of the wealthiest men in history.
“Risk comes from not knowing what you are doing.”
Just out of college, Buffett started working as a stockbroker in his father’s brokerage company, becoming a millionaire in his early thirties. In 1965, he acquired a failing textile mill Berkshire Hathaway, which transitioned to an insurance company, and then to a global holding conglomerate worth nearly half a trillion dollars. Although overtaken by Amazon, Berkshire Hathaway still hold a respectable position of #6 among the Fortune 500.
“Success in investing doesn’t correlate with IQ … what you need is the temperament to control the urges that get other people into trouble in investing.”
With hindsight, Buffett regretted buying the company, calculating it cost him about $200 billion in compound returns over the next 45 years. Buffett’s ascension to the billionaire club happened in 1986, at 56 years of age. In subsequent years, Buffett gained the moniker “Oracle of Omaha”, after his home state, due to his knack for understanding the stock market and not succumbing to trends.
The chance of becoming a billionaire from scratch was always minuscule. However, with the modern corporate consolidation underway, do you think it is more out of reach than ever before?
Disclosure:Tim Fries has no positions in any of the stocks mentioned, and has no plans to initiate any positions within the 72 hours following the publishing of this article. This article expresses the opinions of Tim Fries. Tokenist Media LLC has no position in any of the stocks mentioned, and does not plan to initiate any positions within 72 hours of the publishing of this article. Please consult our website policy for more information.
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.