Earlier this year, CEO Greg Abel announced that Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) resumed its share repurchase program in March. But much to investors’ disappointment, the company’s first-quarter earnings report revealed just $235 million in total share repurchases that month. That’s practically unnoticeable for a company with a market cap of more than $1 trillion.
It looks like Abel stepped up the repurchase activity in the second quarter. A Barron’s analysis of Warren Buffett’s SEC filings in July indicates Berkshire Hathaway’s Class A share count declined by around 11,000 between April 14 and July 14. Due to rounding and estimating the average share price of repurchases, the actual amount spent buying back shares won’t be known until Berkshire releases its Q2 earnings results. However, Barron’s suggests the amount could be as high as $11 billion.
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That’s a bullish sign for shareholders.
Should you buy Berkshire Hathaway stock now?
When Berkshire Hathaway buys back its own shares, it’s usually a good sign that management believes its shares are undervalued. Chairman Warren Buffett has decried companies that repurchase shares without regard for their stock’s price or value. Conversely, Berkshire’s share repurchase authorization permits repurchases only when “Berkshire’s Chief Executive Officer, after consultation with the Chairman of the Board, believes that the repurchase price is below Berkshire’s intrinsic value, conservatively determined.”
If Berkshire did buy back $11 billion worth of shares in Q2, it would be the largest repurchase in the company’s history. The previous record was in the fourth quarter of 2020, when Buffett bought back $9 billion worth of Berkshire stock. As such, it would indicate extreme bullishness on the part of Abel and Buffett, and help decumulate the massive cash pile on the company’s balance sheet.
Berkshire Class A share price averaged about $721,000 per share between April 14 and the end of the quarter, which is the best estimate for the average purchase price for share repurchases during the period. Shares have climbed since the end of May, but the valuation remains compelling.
The stock trades for just 1.5 times book value, based on data from the end of Q1. That number may be closer to 1.4 times book value based on up-to-date data. Investors will have to wait until the Q2 financial release to get more exact numbers.
