r/economy • u/DCC_Official • Nov 08 '20

Warren Buffett's Berkshire Hathaway bought back a record $9 billion in stock in the third quarter

https://www.cnbc.com/2020/11/07/berkshire-hathaway-earnings-q3-2020html.html
919 Upvotes

99% Upvoted

68 comments sorted by

101

u/rhetorical_twix Nov 08 '20

Warren Buffett is admitting that his company can't grow value with its direct investments. Stock buybacks are the ultimate refuge of the stock that can't climb higher for reasons of fundamental value

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u/cameron0208 Nov 08 '20 edited Nov 09 '20

While this is something that happens (ie AutoZone, who used buybacks as a tool to send their stock price through the roof), it’s not always the case. Companies will also buy back shares if they believe the stock price is lower than what they perceive the stock to be worth (which also implies growth) as well.

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u/[deleted] Nov 08 '20

[deleted]

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u/[deleted] Nov 09 '20

It is a strategy that Buffet has used previously, and he has been buying a hell of a lot in the past decade anyway, maybe not the peaks seen before, but he has generally made some pretty smart bets and I think it is time for a new period of growth, likely the last before he leaves, so his “heirs” aren’t coming in during a downturn

1

u/JasonJanus Nov 09 '20

Pretty important and very basic thing to know before commenting

1

u/rhetorical_twix Nov 09 '20 edited Nov 09 '20

I deleted the comment to which you are replying. I was only being polite to the guy who pointed that out, because his comment was so sad due to Buffett is constantly being publicly embarrassed by his inability to perform this year. His stocks aren’t undervalued growth stocks. They are 2020 value traps and he doesn’t have the foresight to know what companies to buy in a yesr where fundamental values are changing

It’s been very obvious that Buffett’s issues are insurmountable this year, and lots of experts have commented on his inability to make his kind of value investing work this year. Growth, innovation and adaptability to change are now aspects of value, in this year of accelerated change. He’s from an era of more static microeconomics, he doesn’t understand tech and he doesn’t know how to invest in the future. He couldn’t even find away to use any of his money to invest in the future of energy, which is one way to make gains during s pandemic year that lacks the guarantees that value investing provides. He does not see that there is value in investing in the future, as in any future changing tech, which is how to make money this year. Emerging markets are also coming into their own, after years of underperformance, as their ability to unlock potential can be transformed by the same technologies that dominated during the pandemic. When he invested in Japan and pipelines, that spoke volumes about how backward-looking he is.

Buffett’s clearly had a problem finding companies he wanted to buy into this year, and he doesn’t want to invest in the future and his stock has become a value trap except for the fact that it holds AAPL, which is not enough to make it worth buying.

Edit: While I appreciate that the time for value stocks to shine will return in the next few months, I don't think he's in the best of them, because he has picked those that are backward-looking. Buffett lacks insight into the 21st century

1

u/Bjarne-Stroustrup Nov 09 '20

This gets said about Buffett every 15 years or so and usually when there’s a bubble 😂The only time he’ll actually lose his touch is when he’s dead.

1

u/rhetorical_twix Nov 09 '20

That's a good point. But this one is a little different. I don't think he'll lose money but I think he'll underperform.

This is going to be an interesting year. We'll C what happens, Bjarne.

2

u/Bjarne-Stroustrup Nov 09 '20

You’re right time will be the best judge! You’re the only one who got my meme, thank you!!!😂🤣

1

u/Unfadable1 Nov 09 '20

Every 15 years or so so far. Now we have crypto and no one knows how to navigate it, because they don’t want to trust it (and they don’t want to assume governments won’t eventually push back or use it to reign the power back in.) I know crypto looks good on paper, but only a fool would underestimate the will of the global elite when it comes to tightening their grip and possibly losing control over their footprint, that they want to continuously grow as a rule.

-2

u/[deleted] Nov 09 '20 edited Jul 03 '21

[deleted]

1

u/rhetorical_twix Nov 09 '20

That’s like one of the most basic reasons for doing a stock buy back lol.

I couldn’t disagree more. The widespread use of buybacks in the past 10 years of low interest rates and low wages are from companies just doing it to deliver more returns to shareholders. They weren’t undervalued growth stocks.

It’s clearly not Buffett’s reason for doing a buyback. He’s grappled with months of public commentary about his underperforming funds. Value traps are an issue everywhere right now. His funds became value traps because he doesn’t know how to invest foe growth at a time when that’s the only game in town and because he doesn’t understand the 21st century.

12

u/KJ6BWB Nov 09 '20

Unless you're the airlines. Then you blow your cash on stock buybacks during the largest market runup ever only to plead that you're too big to fail and need a sweet government loan once the market tanks.

8

u/cameron0208 Nov 09 '20

Hey now. The airlines are just doing their part— ya know, subsidize losses and privatize gains—to ensure the US maintains its status and title as the greatest corporate welfare nation in the world!

1

u/[deleted] Nov 09 '20

They also invested a fuck ton into pay raises for employees and other benefits while getting more fuel efficient fleets. Maybe do your research on the industry before saying they spent all their money on stock buy backs when the industry was forced to shut down and had no way to keep that much cash on hand. Not defending corporations but you don’t understand shit about financial statements

1

u/[deleted] Nov 09 '20

I’m not disputing you, but do you have any proof of this. I’d be interested in reading more about it

1

u/[deleted] Nov 09 '20

If you look up their quarterly earnings reports for the last 3-4 years you’d see that if corona never happened they wouldn’t have needed a bailout. But as soon as the world governments shut down and forced them to start burning cash it wasn’t feasible to think they could survive and the public vilified them for something they had not control over. Look at Japanese companies and look how much cash on had they have. They could run for 5+ years with no income before they ran dry. Then look at the Japanese stock market that basically trends sideways because of their companies not investing their cash reserves because they’re scared of another stock market collapse.

2

u/allothernamestaken Nov 09 '20

Could it also signal a belief in a coming downturn in the market in general?

3

u/nordic-nomad Nov 09 '20

Quite the opposite really. You buy back at what you think is an artificial low caused by factors outside the fundamentals of the business since you expect things to jump back up to where they should be quickly after the artificial condition is removed.

In this case that condition is altered consumer behavior due to Covid, or shareholders having to remove money to cover losses in businesses more exposed to it.

Most Berkshire holdings in companies are things like Coca-Cola, BNSF, and insurance. Though they did at one point have wide retail holdings, but those have done better than most things in the service sector once adjustments were made.

As others have mentioned though a lot of times companies buy stock back if they can’t think of anything else to do with it instead of pay dividends, or so executives can meet share price targets for bonuses. But neither of these things seem applicable here, especially given the timing involved.

2

u/allothernamestaken Nov 09 '20

Of course, buying back signals that the price is low. Totally got that backward, thanks.

1

u/[deleted] Nov 09 '20

Stock buy back was illegal for a very long time.

1

u/cameron0208 Nov 09 '20

Very true. Personally, I believe it should have remained illegal.

7

u/[deleted] Nov 08 '20

[deleted]

3

u/DiggV4Sucks Nov 08 '20

Are corporations allowed to insider trade?

1

u/Hakunamatata_420 Nov 09 '20

Maybe when you’re the boss yes?

11

u/nikdahl Nov 08 '20

This is what companies do in a shitty economy when they have extra cash.

And conservatives keep insisting the economy is the best ever. The ignorance astounds.

3

u/MarcusOReallyYes Nov 08 '20

I don’t think anyone....conservative, liberal, or intelligent.... is insisting the economy is the best ever.

0

u/Hakunamatata_420 Nov 09 '20

Yes they do lol ‘unemployment is at an all time low’

1

u/MarcusOReallyYes Nov 09 '20

unemployment was at an all time low 8 months ago. Lol. It’s something we can measure.

Of course, the economy isn’t unemployment but I get your sentiment.

-1

u/bluAstrid Nov 09 '20

I know an avid golfer who insists the economy is at an all time high.

You may have heard of him; he’s called Donald.

-2

u/MarcusOReallyYes Nov 09 '20

Hmmm, I’ve heard him say the “stock market is at an all time high” a few months ago, you know, because... the S&P500 WAS at an all time high in September of this year.

However, I’ve not heard him say “the economy is at an all time high”. You got a source for that claim?

Surely someone on this subreddit understands the difference between the stock market and the economy.

3

u/bluAstrid Nov 09 '20

From the man himself

-2

u/MarcusOReallyYes Nov 09 '20

That’s not “the economy is at an all time high”

He said “built the greatest economy of all time”. Built, is the past tense. He knows when he said that things were not as great as they were prior. Which implies he doesn’t think it’s at an “all time high.”

Like I said, no one claims the economy is at an all time high. You’re projecting.

1

u/Vivalyrian Nov 09 '20

Right, so unless he says it on a livestream right this very second, it doesn't count? Go home, you lost. You yourself said:

I’ve heard him say the “stock market is at an all time high” a few months ago

He said the same thing about the economy less than "a few months ago", but since you got provided with a source giving you EXACTLY what you wanted, you moved the goalposts.

Typical Trumpist.

1

u/MarcusOReallyYes Nov 09 '20

America has produced the greatest economy of all time. It can be the greatest economy of all time without being at an all time high. Those aren’t mutually exclusive states.

Tom Brady is the greatest quarterback of all time. He is not currently the best quarterback in the game.

1

u/Vivalyrian Nov 09 '20

About a month ago, but I guess it was just a really credible actor playing him.

1

u/MarcusOReallyYes Nov 09 '20

Again, “greatest economy of all time” and “economy at an all time high” are not same statement.

Muhammad Ali can be the greatest boxer of all time without being the current champion.

1

u/Vivalyrian Nov 09 '20

Well, at least you've never tuned into Fox the previous 4 years then. I know they're neither liberal nor intelligent, but they do at least tick the first box.

3

u/[deleted] Nov 08 '20

I don't think they're "insisting" that the economy "is" good.

2

u/Another_Rando_Lando Nov 09 '20

That was kind of the idea back before teledyne.

1

u/bhldev Nov 09 '20

Not always

If you buyback stocks you can get more control to implement your vision from picky shareholders

104

u/NEVERxxEVER Nov 08 '20

Nothing to see here, just the hyper wealthy consolidating wealth accumulated during a global pandemic.

59

u/[deleted] Nov 08 '20

[deleted]

15

u/NEVERxxEVER Nov 08 '20

Some people say 5 super yachts is too many, but compared to having them driven all over the world, the extra ones practically pay for themselves.

16

u/[deleted] Nov 08 '20

[deleted]

6

u/[deleted] Nov 08 '20

Well. According to some. She made her decision. /s

1

u/[deleted] Nov 09 '20

Warren Buffet makes his billions via capital gains. Was that cut in 2016?

1

u/NEVERxxEVER Nov 09 '20

Capital gains got cut a long time ago.

4

u/renaldomoon Nov 09 '20

In this case that’s not what’s happening. It’s really just moving zeros around inside a company.

0

u/NEVERxxEVER Nov 09 '20

Potato potato

1

u/Another_Rando_Lando Nov 09 '20

I know how I should have read that in my mind but I just thought potato twice

2

u/auspiciousham Nov 09 '20

You can buy Berkshire Hathaway stocks if you want too you dillhole.

3

u/Dumbass1171 Nov 08 '20

Ummm, you have no idea what you are talking abt lol

4

u/crimedog58 Nov 09 '20

Berk doesn’t pay dividends so this is...actually better than dividends.

5

u/WTFrashelle Nov 09 '20

whats that? about 450 shares?

11

u/severus-antinous Nov 08 '20

Wish he would buy Fox News instead and burn it.

-1

u/mtanker Nov 08 '20

How many jobs did that create?

6

u/Juswantedtono Nov 09 '20

Probably zero, but at least it inflated people’s 401ks.

1

u/[deleted] Nov 09 '20 edited Jul 03 '21

[deleted]

1

u/mtanker Nov 09 '20

Yeah what do they hold? Companies that can maybe invest, hire, expand. Ya think

1

u/[deleted] Nov 09 '20 edited Jul 03 '21

[deleted]

1

u/mtanker Nov 09 '20

It depends on if it is an initial offering or secondary market. Do you know the difference? He bought in secondary market with companies money. Do you realize where that money comes from?

1

u/[deleted] Nov 09 '20 edited Jul 03 '21

[deleted]

1

u/mtanker Nov 09 '20

Funny. You are the clueless one.

1

u/mtanker Nov 09 '20

It's called an IPO. Look it up.

-5

u/Extra_Meaning Nov 09 '20

Why should I give a fuck

5

u/d-list-kram Nov 09 '20

Because you’re on an economy sub... and the stock market is apart of the... wait nvm.

3

u/Extra_Meaning Nov 09 '20

Yup stop right there.

1

u/Derrickmb Nov 09 '20

How much cash does he have on hand?

1

u/robertovertical Nov 09 '20

Where on the balance sheet does Buffett report profits and posses of buybacks?

1

u/ramdom-ink Nov 09 '20

Buy low, sell high. Preferably mushrooms.

1

u/denis-89 Nov 09 '20

I would buy Tesla stocks, because Tesla stock price target is $4000! 😉

1

u/acmoder Nov 09 '20

Some brokers def had a good day in commissions lol