Buffett Leans Into New Way to Use Cash With Buybacks

Warren Buffett has gone from a stock-buyback skeptic to one of the world’s biggest repurchasers as his own firm becomes his favorite investment in the pandemic.
The famed investor’s Berkshire Hathaway Inc. spent the third quarter buying back about $9 billion of its own stock, more than it had repurchased in any full year in its history. 
The buying spree takes the total repurchases in the first nine months of 2020 to $16 billion, and the most recent pace would be the biggest of any US company except Apple Inc., which happens to be Buffett’s largest investment, Business Insider reported.
Buffett, 90, has been struggling for years to find attractive deals that would deploy his cash pile into higher-returning assets to help supercharge the growth of his conglomerate. 
In recent years, he’s backed off his long-held aversion to share buybacks. Now, repurchases led his capital-deployment maneuvers in the quarter, alongside a roughly $6 billion investment in Japanese trading houses, a bet on Snowflake Inc. and a deal for natural gas assets.
“You start to talk about a pretty significant amount of cash that’s been put to work,” Jim Shanahan, an analyst at Edward Jones, said in a phone interview. 
Big multibillion investments “are difficult to come by and in the absence of that, they’re finding ways to put cash to work, I think in a meaningful amount”.
The buybacks allowed Buffett to chip away at Berkshire’s cash pile in the third quarter, with that war chest dropping slightly to $145.7 billion, the company said on Saturday. 
The funds, which still give him plenty of capital to deploy into acquisitions, stock purchases or buybacks, have recently been accumulating faster than Buffett can put them to work in higher-returning assets.
The heightened buybacks could indicate more optimism in the conglomerate’s prospects, just months after Buffett told Berkshire shareholders at the annual meeting in May that repurchasing shares wasn’t more compelling than when the stock was much higher before the pandemic.
Berkshire stock climbed 20% in the third quarter, surpassing the 8.5% gain in the S&P 500 Index during the same period. The company accelerated its repurchases even as the shares climbed through the quarter. 
Still, Berkshire stock is overall cheaper than it was at the end of last year, with Class A shares down 7.6% through Friday’s close.
The buybacks likely continued into October. Saturday’s filing shows that Berkshire’s share count decreased even through Oct. 26, indicating Berkshire spent at least $2.3 billion repurchasing stock during those weeks.
“The forceful share buybacks suggest that at least one lever that can be pulled more forcefully as the price lingers is the one that he’s doing,” Thomas Russo, who oversees more than $9 billion, including Berkshire shares at Gardner Russo & Gardner LLC, said in a phone interview. “I’m delighted to see that kind of commitment.”