“Berkshire Hathaway’s $75 Billion Buyback Bonanza: Warren Buffett Rewards Long-Term Shareholders”

Berkshire Hathaway, the conglomerate led by legendary investor Warren Buffett, has been actively reducing its share count through buybacks in recent years. Buffett views the repurchase program as a way to reward long-term shareholders and increase their wealth without the need for additional investment.

According to Berkshire analyst Greggory Warren at Morningstar, the company has repurchased nearly $75 billion worth of its common stock over the past five and a half years, eliminating more than 10% of its total shares outstanding. Buffett initiated the buyback program in 2011 and has relied on repurchases in recent years, especially during a competitive dealmaking environment and an expensive stock market.

Buffett believes that buybacks are beneficial to shareholders because they increase their percentage of shares held in the company without requiring any additional investment. He has stated that when the price/value equation is right, buybacks are the easiest and most certain way to increase shareholder wealth.

Berkshire will only buy back shares when two conditions are met: Buffett believes the stock is selling for less than it’s worth, and the company will still have ample cash after the proposed buybacks. Buffett has emphasized that it would be “value-destroying” if he overpaid for Berkshire shares, as it harms shareholders.

In the first quarter of 2024, Berkshire spent $2.6 billion to buy back its own common stock on the open market, up from $2.2 billion in the previous quarter. Buffett has expressed satisfaction with the current pace of buybacks but mentioned that if prices are attractive, he would consider spending even more on repurchases.

Shares of Berkshire Hathaway have performed well in 2024, with the stock up more than 20% and reaching a record closing high. UBS estimated that Berkshire’s shares are trading at around a 6% discount to intrinsic value, compared to the 19% average discount since the company resumed repurchases in 2018. The Wall Street firm projected that Berkshire repurchased almost $2.5 billion worth of stock in the second quarter.

Overall, Buffett remains focused on reducing shares when it makes sense to do so and is open to seizing occasional big opportunities for buybacks. The company’s commitment to rewarding long-term shareholders through buybacks reflects Buffett’s belief in creating value for investors over the long term.