Berkshire Hathaway spends down cash pile under CEO Greg Abel

NEW YORK: Berkshire Hathaway Inc has spent about US$4.5bil to buy back its own shares in the second quarter and purchased nearly US$20bil of equities in the period, signs that chief executive officer (CEO) Greg Abel is putting more of the firm’s cash pile to work.

Berkshire started buying back its own shares in the first quarter for the first time in more than a year.

Earlier this year, Abel said Berkshire was restarting buybacks because executives found the “intrinsic value” of those shares exceeded their market price.

“People are going to be encouraged by the buybacks,” said Cathy Seifert, an analyst for CFRA Research. “It’s also Abel’s way of taking the helm and asserting himself.”

The stock buybacks provided shareholders with their largest quarterly payout since 2021. The firm’s cash hoard fell to US$365.5bil in the second quarter, down from roughly US$397bil in the prior period.

Operating earnings climbed 16% in the three months through June to nearly US$13bil, driven in part by gains in the conglomerate’s manufacturing, service and retailing division, as well as at its utilities business, the Omaha, Nebraska-based company said last Saturday in a statement.

Berkshire’s earnings are typically closely watched because its businesses – ranging from insurance to railroads to energy and manufacturing – provide a snapshot of the health of the United States economy.

After years of relatively quiet deal activity under Warren Buffett, who often complained of high market valuations, his successor sealed back-to-back multibillion-dollar transactions.

The newly minted CEO spent US$6.8bil to buy homebuilder Taylor Morrison Home Corp, a typical value bet, while also handing US$10bil to Google parent Alphabet Inc to support its investments related to artificial intelligence, a new area for the conglomerate.

The deal puts Alphabet among Berkshire’s top five holdings at the end of the quarter, replacing Chevron Corp. The Taylor Morrison transaction closed in the third quarter.

Halfway through his first year at the helm of Berkshire Hathaway, Abel has been praised by shareholders for his leadership. Still, Berkshire’s Class B shares rose 3.8% this year as of market close last Friday, compared with a roughly 13% gain for the S&P 500 – a benchmark that Buffett himself frequently cited. — Bloomberg