Buffett Loves Berkshire Stock

Warren Buffett's favorite stock last year was Berkshire Hathaway's. For a second-straight year, the Oracle of Omaha was a net seller of public equities in 2021. But he did steer his company to a record year of share buybacks. 

Andrew Bary covered Berkshire's fourth-quarter results, which came out on Saturday, noting that the conglomerate had a record operating profit and repurchased more of its stock than ever before last year. That's more than plenty to keep shareholders of most businesses happy.

But Buffett's followers have been eager to learn of the legendary investor's next big stock purchase, with Berkshire sitting on a cash pile of almost $150 billion. The problem is that he continues to see a dearth of opportunities in a pricey market, and Berkshire has been a net seller of about $15 billion from its stock portfolio over the past two years.

Instead, Berkshire bought back a combined $52 billion of stock in 2020 and 2021, retiring about 9% of its shares outstanding. That leaves remaining shareholders with a larger stake in the business, increasing the value of their stock. It has helped Berkshire stock stay ahead of the broader market over the past year, but the buyback boost may be slowing.

Andrew wrote:

The buybacks totaled a record $27 billion in 2021, up from $24.7 billion in 2020. The CEO emphasized that Berkshire would be price-conscious in its buybacks and the company scaled back repurchases so far in 2022, buying back $1.2 billion through Feb. 23. Berkshire’s stock has rallied 6% this year and is up 23% over the past year, more than double the return of the S&P 500 index.

'I want to underscore that for Berkshire repurchases to make sense, our shares must offer appropriate value. We don’t want to overpay for the shares of other companies, and it would be value-destroying if we were to overpay when we are buying Berkshire,' Buffett wrote [in his annual shareholder letter published Saturday]. 'Our appetite remains large but will always remain price-dependent.'

Berkshire's operating businesses had record profits last year. Those include the Burlington Northern Santa Fe railroad, Berkshire's insurance operations, and a collection of utilities and infrastructure assets.

After-tax operating profits reached $27.5 billion last year, up from $21.9 billion in 2020. Including paper gains from the company's $300 billion stock portfolio, earnings were just below $90 billion in 2021, up from about $43 billion in 2020.

Read much more from Andrew on Berkshire's results here and here.