If you're invested in Berkshire Hathaway (BRK.A -0.23%) (BRK.B -0.46%) then you're surely a fan of its inimitable chief, Warren Buffett. The "Oracle of Omaha" is one of the most successful investors in history -- and one of the richest.
Those lucky enough to have invested with Buffett and his firm early on have made out nicely and that's putting it lightly. Just a $1,000 investment in Berkshire in 1980 would be worth $2.4 million today.
A shortcut to valuing Berkshire Hathaway
Those looking to add more Berkshire to their portfolios may be asking, is now a good time? Is the company fairly valued in the market? There are all sorts of ways to try to measure this. It's not easy though. The company is a massive conglomerate with disparate businesses and defies simple attempts at valuing its stock. Should you use a price-to-earnings (P/E) ratio? Price-to-book (P/B)? What about a discounted cash flow (DCF) model?
Instead, you could look to Buffett himself. In 2018, the board of directors of Berkshire changed the rules so that Buffett can repurchase shares of Berkshire anytime he believes them to be priced "below Berkshire's intrinsic value, conservatively determined." Even if this isn't a quantitative metric, it's a gauge of Buffett's own sentiment. If major buybacks are happening, it means Buffett thinks his stock is undervalued. This is a number all Berkshire investors should pay attention to.
Here's the company's track record over the past five years.
BRK.A Stock Buybacks (Quarterly) data by YCharts.
Berkshire spent billions buying shares in that time. Interestingly, the buybacks hit their lowest level in some time last quarter. I would keep an eye on this trend, but remember there are lots of factors that go into this decision. Just because buybacks are lower doesn't necessarily mean the stock is overpriced in Buffet's view; he may believe there's a better way to use the company's resources at that time or shortly.
