Adam Patti
CEO of VistaShares, Founder of IndexIQ
Berkshire Hathaway's $4.5 billion buyback is a valuation signal that its shares trade below intrinsic value. Berkshire repurchases only when management believes that, and it had bought none for six quarters; insiders who wrote the intrinsic-value rulebook buying again says more than any multiple. @VistaSharesX adds that Q2 also saw the cash pile fall and Berkshire turn net buyer of stocks, the first quarter that looks like Greg Abel's. x.comÂ
Berkshire Hathaway is where money went on the year's worst tape, a sign capital is already voting for a regime that favors durable balance sheets. When one supplier's cautious guidance sent the Nasdaq down 4.2% and erased over $1T from chip stocks, money moved not to cash but to Berkshire, up 2%, and insurers such as Progressive and Chubb, per @VistaSharesX. x.comÂ
Berkshire Hathaway's return to net stock buying makes bearishness hard to justify. It beat earnings, repurchased $4.5B of its own shares and was a net buyer of about $20B in stocks, ending 14 straight quarters of net selling. x.comÂ
Berkshire Hathaway is not a company to bet against after a strong Q2. Investment gains nearly tripled year over year, from $6.36B to $16B, net income more than doubled, and buybacks jumped from under $300M last quarter to $4.5B. x.com x.comÂ
Berkshire Hathaway's recent bets show impressive mental dexterity, but they are still small dollars for a company its size. It bought Alphabet above its long-term average multiple, at more than twice its price of a year earlier, perhaps the highest multiple Berkshire has paid for an investment that size, apparently betting on good returns from roughly $200B of growing AI capex. It also bought Delta despite Buffett calling airlines a mistake after COVID. x.com x.comÂ
Berkshire Hathaway benefits from a flight to low-beta quality stocks that are not burdening themselves with AI debt. Its shares are up 10% in October, while three of its largest holdings, Apple, Coca-Cola and Chevron, have been surging. Boring pays. x.comÂ
Berkshire Hathaway is worth accumulating because its insurance float and $324.9B Treasury bill pile pay it to wait for an opportunity, so higher rates bring income and leverage over whoever runs out of cash first. It passes the Second Paycheck Test at unmatched scale, with $177.5B of float. Rate gains alone are small, about $642M after tax per quarter point, and GEICO's underwriting profit fell 45%. Management bought about $4.5B of stock near 1.4x book; at 1.48x, accumulate, don't chase. x.com … Show more
Berkshire Hathaway's capital allocation has changed for the worse under new leadership, as its $8.5B all-cash Taylor Morrison acquisition buys a homebuilder just as home prices reverse, new homes lose their premium and goods and commodity inflation takes off. Its large Alphabet stake looks similarly unwise. x.comÂ
Berkshire Hathaway is at least a hold and probably a buy, as Greg Abel could be the CEO it now needs. A post the author replies to calls its 13.95 P/E insanely cheap. x.comÂ
Alphabet is hard to bet against now that Berkshire Hathaway has recently bought the stock, a strong vote of confidence. x.com x.comÂ
Berkshire Hathaway offers no edge over simply owning the S&P 500. Its supposed defensiveness does not hold up, since both fell over 50% in the financial crisis and over 30% in 2020. Investors worried about a recession can keep some cash themselves rather than rely on Berkshire's cash pile. x.com x.comÂ
Berkshire Hathaway is an attractive hedge against speculative holdings because its fortress balance sheet gives it optionality either way. If markets do well, it cruises with existing assets and collects yield on its cash. If markets drop, it can buy the dip like no other. x.com x.com x.com x.comÂ
