Warren Buffett made no splashy deals in 2020, and he didn’t weigh in on some of the year’s most contentious topics in his much-anticipated annual letter. Behind the scenes, the 90-year-old billionaire was hardly inactive.
Berkshire Hathaway Inc. was firing up another engine: stocks -- both buying its own and trading others. The conglomerate snapped up $24.7 billion of Berkshire shares last year, a stark record for the business sitting atop a $138 billion cash pile. It also almost doubled the volume of buying and selling of other stocks compared with 2019.
The moves signal a carefully forged path in markets sent convulsing by the pandemic and then lifted by stimulus that’s paved the way for heavy retail trading and an unprecedented SPAC boom. And Buffett is sticking close to home -- ultimately becoming a net seller of shares in other companies for the first time since 2016, while his prolific repurchases of Berkshire stock continued into this year with at least $4.2 billion of buybacks through mid-February, according to a regulatory filing Saturday.
“Last year we demonstrated our enthusiasm for Berkshire’s spread of properties by repurchasing the equivalent of 80,998 ‘A’ shares,” Buffett said in the letter released Saturday. “That action increased your ownership in all of Berkshire’s businesses by 5.2% without requiring you to so much as touch your wallet.”
Berkshire’s Class A shares climbed as much as 3.1% to $376,000 Monday morning, their biggest intraday gain since early November. Meyer Shields, an analyst at Keefe Bruyette & Woods, said in a note Sunday that the “positive commentary around sustained repurchases” would probably boost the stock price.
The billionaire investor carefully steered clear of other major topics from the past year, mentioning the Covid-19 pandemic only once in the letter and avoiding hot topics such as politics. Investors got just the 15-page letter, which has been getting shorter in recent years, and missed out on his routine CNBC appearance Monday, the first time in 14 years that he’s not been on for an interview after the release of his letter, according to the network.
Still, Buffett spent a sizable portion of Saturday’s letter delving into buybacks, a substantial shift for an investor who previously had largely shunned the practice and instead favored purchasing big businesses or stocks of other companies. He loosened the buyback policy in 2018 as Berkshire’s cash pile kept reaching new heights. And Berkshire stock, which has underperformed the broader market in recent years, continued that trend last year with shares just gaining 2.4% compared to the 16% rally in the S&P 500 Index.
Buffett had long been careful with buybacks, a trait that harkens back to his days running a partnership. In his letter released in 2019 after the buyback change, he made it clear that he wants investors to be fully informed about the company before they decide to sell their shares back to the firm.
“Berkshire is likely to stay conservative on large investments, we believe, looking to alternatives like the record $9 billion in share buybacks in each of 3Q and 4Q,” said Matthew Palazola, senior industry analyst.
He spent his recent letter acknowledging that there were investors, including index funds, professional managers and individuals, who were required to hold some Berkshire shares or would be likely to come and go based on their investing judgment. He’d still stick by the investors who want to invest for the long term, he added.