Buffett, the Oracle of Omaha, spoke

The question is, will Berkshire Hathaway’s huge vaults tarnish Buffett’s relatively intact reputation? It’s very difficult to answer without an oracle-esque prophetic view.

It’s not like the business juggernaut has sat on its laurels while raising money. For the past four quarters, Berkshire Hathaway has been a net seller of equities, notably reducing its holdings in insurance, banking and financial investments.

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The conglomerate, home to several insurance companies including Berkshire Hathaway Specialty Insurance and auto insurance giant GEICO, revealed in its third quarter (Q3) results that it had sold nearly $ 2 billion more shares that he had bought during the three months ended September 30. , and yet its treasury still swelled to nearly US $ 150 billion.

Perhaps another suitable nickname for Buffett would be Money Magnate of Omaha.

Cash is swelling in Buffett’s purse, but, for now, the Oracle (a world-renowned investor with near-divine financial vision) seems to be struggling to make investments worthy of his title.

Analysts agree that the sequence of sales of Buffett’s shares is largely tied to sky-high prices in the stock market, as well as fierce competition from private equity firms and special purpose acquisition firms (SPACs). ).

Earlier this year, Berkshire Hathaway chairman and chief executive warned investors that the conglomerate’s trading activities could run into trouble as PSPCs experience a time of explosive growth.

But like Buffett (aka Oracle), he also suggested that he believed the PSPC boom wouldn’t last.

If Buffett predicts the demise of PSPCs, then it has to happen, right? Who knows? But any prophecy from Berkshire leader Hathaway tends to be so influential that investors are inevitably pressured to act.

Predicting this way, perhaps the old investor was just creating the market for Berkshire Hathaway’s future success. If the 91-year foresight over PSPCs comes true, the company is ready to pull the trigger on one (or more) massive acquisitions. It is, after all, “drowning in the money”.

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Until then, the good old Oracle has used a different trick up his sleeve – one he’s, in fact, avoided in recent years. Berkshire Hathaway has managed to deploy billions of dollars while struggling to secure booming acquisitions backed by share buybacks.

The US-based company repurchased US $ 7.6 billion of shares in the quarter ended September 30, compared to US $ 6 billion of shares repurchased in the previous quarter. In the first nine months of 2021, the group repurchased more than $ 20 billion of Berkshire Hathaway shares.

Bloomberg spoke to Cathy Seifert, analyst at CFRA Research, about what this means. She said, “The bullish case looks like they bought back $ 20 billion worth of their stocks because they are confident about their future prospects and that should be a catalyst for stocks, and I the feeling that it probably will be.

“The case of the bear, which it is also relevant to underline, is that it is about a company which had, like a declared desire, the need to make additional acquisitions and they did not have been able to do so. “

So the reality is this: The Oracle has been thwarted by the market conditions, and the result is that Buffett [as a metonym for Berkshire Hathaway as a whole] now has too much money. But it is highly unlikely that the conglomerate will actually drown in its record mass of money.

After all, its president is the Oracle of Omaha, so I’d think twice before I doubt his strategy.

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