Berkshire Resumes Share Buybacks Under Abel After Buffett Paused Repurchases in 2024 on Overvaluation Concerns

Berkshire Hathaway disclosed in a recent filing with the US Securities and Exchange Commission that it began repurchasing shares this week.

The company said, 'In the interest of transparency with our leadership transition, we are disclosing that we commenced repurchasing shares of our common stock.' Generally, Berkshire Hathaway shares details about share buybacks in its quarterly filings, but now, under Greg Abel's leadership, the company is taking a new direction grounded in Warren Buffett's investment playbook.

Buffett, who recently stepped down as CEO, ensured that Berkshire repurchased shares only when the stock price dipped below its 'conservatively determined' intrinsic value. The company said that the latest stock buyback was approved by Abel after consultation with Buffett. Abel also stated in his first annual letter that Buffett works at the office 'five days a week,' and they stay in close contact as part of efforts to steer the company through volatile markets.

Buffett Broke 6-Year Buyback Streak in 2024

The share repurchase resumes after a long pause. Berkshire Hathaway did not buyback shares in 2024 after six consecutive years of repurchases; a decision analysts had said could mean the stock was overvalued. Berkshire had explained in 2024 that Buffett would buy back shares when he felt the stock price was reasonably valued.

In November 2024, Berkshire Hathaway's Class A stock was trading at around 1.6 times its book value. Book value is a company's implied net value after all company assets are liquidated and debts are paid off. While Berkshire Hathaway had previously said it wouldn't buy back company shares if they traded at more than 1.2 times its book value, the Buffett-run company scrapped that policy in 2018.

AJ Bell analyst Russ Mould highlighted in late 2024 that Berkshire's avoidance of share buybacks as it continued to pile on cash could have implied that Buffett was worried about the overall economy. 'All this suggests that Buffett has serious concerns about the economic backdrop and the current state of the stock market. It implies a risk-off mentality and the hallmarks of an investor who is prepared to sit and wait for a better entry point,' Mould had stated.

Berkshire's Massive Cash Pile

Another filing with the SEC revealed that the Gregory E. Abel Revocable Trust purchased 21 Class A Berkshire shares on 4th March across multiple trades at prices ranging from $725,210.19 to $733,300 per share. The trust now holds 249 Class A shares.

Berkshire's cash and US Treasury holdings have also ballooned to more than $370 billion, which Abel described as both required ballast and 'dry powder.' As Middle East tensions continue to hammer markets, opportunities could arise to buy great businesses at cheap valuations. Berkshire could be looking to use its massive cash reserves to identify and invest in companies that offer long-term value for investors in the near term.

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