Berkshire Hathaway Inc. investors perked up Monday, after Warren Buffett’s investment arm disclosed a big jump in third-quarter profit and said it bought back some of its shares for the first time in six years. The Class B shares
shot up 5.1% in afternoon trade toward a sixth straight gain, and enough to pace the gains among its financial peers, while the Class A
shares gained 5.6%. Considering how well the stock has performed since the last time the company repurchased shares, it’s no wonder when Buffett bets on himself, investors listen. The company reported over the weekend net income for the quarter to Sept. 30 that more than quadrupled to $18.54 billion from $4.07 billion. Since Berkshire Hathaway adopted new accounting standards, earnings in the latest quarter include $11.4 billion in unrealized gains and losses resulting from changes in the fair values of its equity investments, while results prior to January 2018 recorded unrealized gains and losses in other comprehensive income. Don’t miss: Buffett’s Berkshire stock has best day in 7 years after buyback policy change. Berkshire stressed that investors shouldn’t pay too much attention to $11.4 billion in investment gains, and only reported them that way because they are now required to do so: “The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings per share that can be misleading to investors who have little or no knowledge of accounting rules.” Perhaps what is of value to investors, Berkshire Hathaway disclosed in its 10-Q quarterly filing with the Securities and Exchange Commission that it repurchased about $928 million worth of its Class A and Class B shares during the quarter, something it hasn’t done since December 2012. The disclosure comes after the company changed its share buyback policy in July to give Chairman and Chief Executive Buffett and Vice Chairman Charlie Munger more flexibility on when they can buy back stock. The company said it bought 225 Class A shares at an average price of $312,806.74 and 4,139,192 shares of Class B shares at $207.09, for a total spend of $927.57 million. That means Buffett and Munger believe the repurchase prices are below Berkshire’s “intrinsic value,” based on the new buyback policy. Those purchases have so far worked out in the near term, as the Class A shares were trading at above $325,600 in afternoon trade Monday and Class B shares were above $217.
In December 2012, Berkshire bought 9,475 Class A shares at an average price of $131,065.62 and 606,499 Class B shares at $88.76, for a total spend of about $1.30 billion. Buffett’s and Munger’s decision to buy back stock at that time came after the company changed its policy to allow them to pay up to 20% over book value from a previous limit of no higher than 10%. Since the end of 2012, the Class A shares have soared 143% and the Class B shares have run up about 142%. In comparison, the SPDR Financial Select Sector exchange-traded fund
of which Berkshire is the most heavily weighted component, has rallied 102%, the S&P 500 index
has climbed 92% and the Dow Jones Industrial Average
has hiked up 94%. The day after Berkshire disclosed the previous purchases after the March 1, 2013 close, the Class A shares gained 0.1% and the Class B shares slipped 0.1%. Three months later, both the A shares were and B shares were up 12%, while the Dow was 8.3% better. See also: Warren Buffett’s big bet on Apple has one Wall Street trader asking: Has he lost it?