A month ago, Stocktake wondered if investors might give Warren Buffett a trillion-dollar birthday present before he turned 94 on August 30th. They did, with Berkshire Hathaway becoming the first old-economy company to be valued at more than $1 trillion (disclosure: I own shares in Berkshire).
Berkshire is meant to be a boring stock, but 2024 is turning out to be some year for the American conglomerate, with shares up almost 30 per cent – well ahead of the S&P 500 (up 19 per cent) and more than all but two (Nvidia and Meta) of the magnificent seven stocks.
Ironically, the Oracle of Omaha seemingly doesn’t share this enthusiasm for Berkshire stock. Until 2018, Buffett only authorised share buy-backs when Berkshire was valued at or below 1.2 times its book value. That changed in mid-2018, and Berkshire has since been busy on that front, with share repurchases topping $27 billion in 2021.
The pace of buying subsequently slowed, but has remained steady, with Berkshire buying $9.2 billion in stock in 2023. However, Berkshire only bought $345 million of its stock in the second quarter – the lowest quarterly figure since early 2018. The obvious explanation: Berkshire now trades on 1.65 times its book value – comfortably above its five-year median (1.4), around levels last seen in early 2008, and seemingly too pricey for Buffett’s taste.
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