Famed investor and Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) chairman Warren Buffett's stock purchases are always watched closely. After all, the "Oracle of Omaha," as they call him, has crushed the market. Fueled by Buffett's stock picks and timely acquisitions over the years, Berkshire Hathaway stock's average annual rate of return has doubled S&P 500's since 1965, leading to life-changing wealth creation for long-term shareholders.
So, what has Warren Buffett been betting big on lately? In Berkshire's latest quarterly report, the company revealed it had invested $5.1 billion in its own stock. The capital outlay represents Berkshire's biggest share repurchase ever.
A $5.1 billion bet
It's already been clear that Berkshire Chairman and CEO Warren Buffett believed his own company's stock was a good deal. Total share repurchases in the fourth quarter of 2019 and the first quarter of 2020 were greater than all of the company's other stock purchases combined during the two periods.
And now there's absolutely no doubt that Buffett believes Berkshire stock is worth buying, as the Oracle of Omaha's record $5.1 billion of repurchases during Q2 was significantly higher than the $1.7 billion the company spent repurchasing shares in the first quarter of 2020. Even more telling, second-quarter repurchases exceeded the $4.9 billion Berkshire spent buying back its own stock in all of 2019.
Investors shouldn't underestimate the implications of these repurchases. When Buffett buys back stock, it's not some form of financial engineering with little thought about building shareholder value. The CEO has repeatedly emphasized that the company will only buy back its stock if he and his investment partner Charlie Munger believe that it is selling for less than what it was worth.
"If the price-to-value discount (as we estimate it) widens, we will likely become more aggressive in purchasing shares," Buffett said in Berkshire's 2019 annual letter to shareholders. "We will not, however, prop the stock at any level."
What else has Buffett been buying?
Of course, there's always a chance that Buffett spent more money buying another stock during the quarter than it spent repurchasing its own shares. However, given how significant this capital outlay was, it's unlikely that any other single investment exceeded what Berkshire spent on its own shares.
Investors will have to wait until Berkshire files its 13F filing for the quarter to see if there were any other big buys during the period. Last year, Berkshire's 13F filing for its second quarter was filed with the Securities and Exchange Commission on Aug. 14.