Thursday, April 22, 2021

How Warren Buffett used cash to invest in his company’s shares?

Berkshire Hathaway, owned by billionaire Warren Buffett, repurchased its shares (treasury shares) worth $ 24.7 billion in 2020 and said it was about to buy more of its shares in the future, as the giant holding company struggled to find other ways to exploit the enormous cash accumulated in it.

Buffett said on Saturday in his annual letter to investors that the company’s purchase of $ 9 billion in issued shares in the fourth quarter of 2020 was comparable to the record set in the previous quarter.

Buffett’s letter, which has been closely followed for being issued by one of the most famous investors in the world, devoted large parts to the effect of repurchasing of issued shares, in one of Berkshire’s biggest moves to exploit excess liquidity in 2020, because it “has not made any major acquisitions”.

Buffett also touched on the corporate giant’s strategy, and commended commercial activities such as insurance and rail operations in Berkshire.

Buffett has avoided touching on some of the most controversial issues today, including politics, the coronavirus pandemic, and racial equality. But Buffett remained optimistic about America, saying that progress in achieving a “more perfect union” was mixed, but was still moving forward.

Berkshire Hathaway is making little progress in reducing its cash accumulation, which fell by 5% in the fourth quarter of 2020, to $ 138.3 billion.

Buffett has struggled to keep up with the influx in recent years, as Berkshire is disposing of cash faster than it can find higher-yielding assets to seize.

Buffett said that “Apple” is one of the three most important assets in which Berkshire invested at $ 120 billion. The technology company said it plans to buy back its shares as well.

Stock portfolio
Fluctuations in Berkshire’s enormous $ 281.2 billion stock portfolio affect the company’s net income due to accounting technology. This pushed the ratio up 23% to $ 35.8 billion in the fourth quarter of 2020.

Class A shares in Berkshire rose about 2.4% in 2020, less than a 16% increase in the S&P 500.

The billionaire touched on only briefly the most looming questions about Berkshire’s future, relating to his tenure in the company.

Buffett again referred to the preferred CEO, Mrs. Blumkin, who founded the Nebraska Furniture Mart.

Buffett wrote that Blumkin worked until she turned 103, adding, “It’s ridiculously premature retirement age, as Charlie and I have said,” referring to Charlie Munger, 97, vice president of Berkshire.

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