5 Highlights of Berkshire Hathaway’s Third Quarter Report for 2018

Berkshire Hathaway today released its Form 10-Q for the third quarter of 2018.

Five highlights during the third quarter were:

(1) Berkshire’s operating earnings increased by 100% as compared to the third quarter of 2017.

(2) Berkshire repurchased $928 million of its stock, indicating that both Warren Buffett and Charlie Munger conclude that Berkshire’s current price is below its intrinsic value.  Berkshire bought back its shares at an average price of $312,807 per A share and $207 per B share.

(3) Berkshire purchased approximately $13 billion in equities on a net basis, including approximately $15 billion in equities in “Banks, insurance, and finance”.  Berkshire held $103.6 billion cash as of September 30, down from $111 billion on June 30.

(4) Berkshire added approximately $6 billion, or about 30%, to its stake in Bank of America.

(5) Berkshire’s book value equaled $228,712 per Class A share as of September 30.  At Berkshire’s closing price of $308,411 on November 2, its price to book value ratio equaled 1.35, below its historical average of about 1.58.  This implies that Berkshire is now buying back its shares at prices below 140% of its book value, versus its previous standard of 120%.

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  1. JL Eaton says:

    Berkshire Hathaway’s repurchase of shares during the 3rd Quarter at an average of $207 per share (per your Blog — and Thanks!) for the Class B shares bodes exceptionally well for shareholders looking forward to even larger purchases at lower prices. With BRK/B closing at $200 per share in mid-December 2018, the repurchases are likely accelerating … all to the enduring benefit of continuing owners.

    The best thing that Continuing Owners could wish for when it comes to a New Year’s Gift from Mr Market would be another 10 or even 15 percent decline in BRK’s market quote, along with general malaise setting into Wall Street. With more than $70 billion freely available for allocation, and no elephants knocking on the door, an outstanding return on investment would be repurchases at or below $180 per Class B share (not that $207 is a bad deal).

    Although repurchases by vacuous management often leads to astonishingly ignorant results (see XOM results for Continuing Owners) practice of stock buybacks at Berkshire Hathaway — representing the paragon of integrity — is likely to obtain exceptionally strong results for all continuing owners.

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