- Warren Buffett, the chairman and CEO of Berkshire Hathaway, released his annual letter detailing the company's annual performance to shareholders on Saturday.
- In the fourth quarter of 2019, Berkshire Hathaway spent $2.2 billion on share buybacks, the most the company has repurchased in a single quarter.
- Berkshire Hathaway's cash pile was $128 billion at the end of the year. It reached the record amount in the third quarter of 2019.
- Read more on Business Insider.
In the final three months of 2019, Berkshire Hathaway, led by famed value investor Warren Buffett, repurchased $2.2 billion of its own stock, the most the company has spent on repurchases in a single quarter.
The record amount came after the company spent $700 million on share buybacks in the previous quarter. Over the whole year, Berkshire Hathaway spent $5 billion repurchasing about 1% of the company.
Buffett in his annual letter to shareholders, which is released in tandem with the company's year-end report, discussed both the "sense and nonsense of stock repurchases." Berkshire Hathaway will only buy back its stock if Buffett and vice chair Charlie Munger believe it is selling for less than it is worth, and the company is still left with ample cash after the purchase, he wrote.
"Over time, we want Berkshire's share gown to go down," Buffett wrote. "If the price-to-value discount (as we estimate it) widens, we will likely become more aggressive in purchasing shares. We will not, however, prop up the stock at any level."
For Berkshire Hathaway, repurchasing 1% of the company was "a good move," Catherine Seifert, an analyst at New York-based CFRA Research told Markets Insider in an interview.
"I think that buyback in the fourth quarter was very significant, particularly against the backdrop of some of the weakness in the core insurance unit and sort of the mixed results elsewhere," Seifert said, adding that the percentage of Berkshire's repurchased stock is small compared to some of its peers.
Berkshire Hathaway loosened its rule around share buybacks in 2018 making it easier for Buffett and Munger to authorize buybacks when the repurchase price is "below Berkshire's intrinsic value," according to the company. Still, in previous quarters, analysts thought that the company could've spent more on share buybacks.
In addition, Berkshire Hathaway's cash pile is still sitting at a record $128 billion and growing. Buffett has struggled to spend down the cash pile in recent years as he's failed to land a major "elephant-sized" acquisition, despite a few attempts in 2019. He did not make an offer for Tiffany & Co., as he's long avoided bidding wars. Buffett also refused to bid higher for Tech Data, which he lost to Apollo Global Management, a private equity firm.
In Berkshire Hathaway's 2018 letter, Buffett wrote that prices were "sky-high" for long-term prospects, but that he and Munger "continue, nevertheless, to hope for an elephant-sized acquisition."
In this year's letter, Buffett wrote that "the opportunities to make major acquisitions possessing our required attributes are rare."
The company posted net earnings of $29.2 billion in the year, up from a loss of $25.4 billion a year earlier when the company had to take a major write-down on its investment in Kraft Heinz Co. Operating earnings fell 23% in 2019 to $4.4 billion. Berkshire Hathaway Class A shares have gained 1.1% year-to-date through Friday's close.