The world's most popular stock pickers have seen their preference for stocks rise in the third quarter. Now the market slide in October opened the door for Warren Buffett to eventually pit the big cash pile.
Berkshire Hathaway's chairman has poured more money than he buys stocks over the last four years. Buffett spent $ 828 million on stock repurchases for a few weeks in August. Although the amount of repurchase did not reach 1% of company cash, we made a new precedent.
Jim Shanahan, an analyst at Edward Jones, said in a telephone interview, "It's really important in terms of signal effectiveness." They demonstrated that when a stock reaches a value below its intrinsic value, it uses cash to buy the stock I will. "
Buffett (88) faces a mystery. He used Berkshire's cash to do big deals, or Apple Inc. And Coca-Cola Co. for a long time. "It's still a goal to do one or more giant acquisitions," he says. As a result, we struggled to operate a cash pile that surpassed $ 100 billion in the last five quarters.
Cathy Seifert, CFR Research analyst Cathy Seifert, said in a telephone interview, "Berkshire is aimed at closing deals for many years." "But now there is a lot of competition in the M & A market."
Too much cash is a high-level issue and is due to a successful business across the energy, rail and retail industries of large corporations. Operating profit was doubled to $ 6.8 billion in the third quarter due to a rebound in the company's insurance sector.
But investors with so much cash pressured them to use stock repurchases or repurchase and dividends to give cash back to shareholders.
Bill Smead, who oversees $ 2.2 billion, including Smead Capital Management's Berkshire stock, says he can not understand why no one else owns his stock.
The Berkshire board of directors acknowledged the pressure on Buffett and vice chairman Charlie Munger to resume buying shares every time stocks feel less than their intrinsic value, as the stock buyout policy eased in July. The previous policy was limited to purchases only if the price was below the 20% premium to book value.
Buffett has long since repurchased $ 1.2 billion from shareholder property in 2012, but explained to shareholders how to use the money for other purposes if the price is unreasonable. Buffett said he wants to make stock repurchases a special dividend at the annual meeting in May.
Now the worst month for American stocks in seven years has made some of his favorite companies quite affordable. Berkshire's top shareholder, Apple shares fell 8.1 percent from the end of September, while Bank of America fell 5.3 percent.
Buffett said in a interview with David Westin of Bloomberg Television in August, "The fears in the market make a price that I can throw away money as soon as possible." "But we are making money anyway."
He dropped slightly from the cash pile in the third quarter to $ 104 billion at the end of June, down from $ 111 billion.
Buffett discovered his favorite stock despite the price hindering major deals. He bought $ 1.26 billion of equity securities on a net basis during the third quarter, the largest for more than four years. Burkshire continued to add the second quarter to its financial stock positions, adding billions of dollars to its stake in Bank of America in the third quarter.
As the market declined, Berkshire lowered his stock to less than Buffett's price. Some investors thought that despite their confidence in repurchase, they could distort their 3Q results for the third month of the year.
Steven Check, president of Check Capital Management, which oversees $ 1.5 billion, including an investment in Berkshire, "is close to one of the last things he wants to do." He has been in business for over 50 years I avoided it well. "