Berkshire Hathaway relies on share buybacks – profits collapse

Warren Buffett

Buffett has always flirted with the fact that he is not familiar with new technologies and therefore does not invest in the area.

(Photo: AFP)

New York Warren Buffett’s investment company Berkshire Hathaway is increasingly relying on share buybacks in the corona crisis. In the three months to the end of September, the conglomerate said it spent around $ 9.0 billion (EUR 7.6 billion) on Saturday to buy back its own shares. In the third quarter alone, more was spent on this type of share price maintenance than ever before in a full calendar year. Over the course of the year, the amount already adds up to around 16 billion dollars.

Many other corporations have capped their share buybacks to keep the money together in the pandemic. But Buffett sat with Berkshire Hathaway most recently on cash of 145.7 billion dollars. The cash holdings therefore only decreased slightly compared to the previous quarter. The 90-year-old star investor would actually much rather spend the money on investments, but for a long time he largely refused to buy back shares to maintain prices. But Buffett has been struggling to find suitable takeover targets for some time.

The day-to-day business of Berkshire Hathaway continues to suffer from the corona crisis. Operating profit fell 32 percent year-on-year to $ 5.5 billion, with the major insurance business making a loss. The net result, however, benefited strongly from the stock market rally and increased from 16.5 billion to 30.1 billion dollars. Buffett himself, however, always advises not paying much attention to this indicator. Since unrealized investment gains and losses are shown here, there are strong fluctuations that say little about the actual course of business.

Buffett has dared to take cover much more in the past few months than in spring and summer, when he was still very cautious and hesitant because of the corona crisis. At the end of August, just one day after his 90th birthday, Buffett announced that he would be joining five Japanese energy and commodity traders. Berkshire wanted to be “part of Japan’s future,” Buffett announced at the time in the course of the six billion dollar investment.

In September it became known that the Omaha, Nebraska conglomerate acquired a stake in the cloud provider Snowflake. The move was most unusual for Berkshire. Buffett has always flirted with the fact that he is not familiar with new technologies and therefore does not invest in the area. Last year he also said that he did not believe in going straight into a company to go public.

However, the Berkshire boss no longer makes all the decisions himself. His investment managers Ted Weschler and Todd Combs each manage a portfolio of around 14 billion dollars and could be behind this step. According to insiders, Todd Combs is said to be behind the Snowflake-Deal stuck.
More: Warren Buffett’s last big bet.

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