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Long Berkshire Hathaway: Share Buybacks Likely Solution To Excess Cash

Mar. 01, 2018 3:50 PM ETBerkshire Hathaway Inc. (BRK.B), BRK.A34 Comments
Winston Van profile picture
Winston Van


  • A historic bet ends.
  • Berkshire posts a strong balance sheet in 2017, but Wells Fargo gets frozen.
  • Share buybacks are the most likely solution to Berkshire's excess cash, but won't happen soon.
  • Despite narrowing gap, Berkshire will continue outperforming SPY based on fundamentals.
  • I give notes on the letter to the shareholders.


2017 brought a $65B gain: $36B came from Berkshire's (NYSE: NYSE:BRK.B) (NYSE:BRK.A) operations while $29B came from changes in the Tax Code.

The 10-K footnote sums up changes to the biggest holdings between 2017[1] and 2016[2]:


Approximately 65% of the aggregate fair value was concentrated in five companies (American Express Company (AXP) - $15.1 billion; Apple Inc. (AAPL) - $28.2 billion; Bank of America Corporation (BAC) - $20.7 billion; The Coca-Cola Company (KO) - $18.4 billion and Wells Fargo & Company (WFC) - $29.3 billion).


Approximately 60% of the aggregate fair value was concentrated in five companies (American Express Company - $11.2 billion; Bank of America Corporation - $14.5 billion; The Coca-Cola Company - $16.6 billion; International Business Machines Corporation (IBM) - $13.5 billion and Wells Fargo & Company - $27.6 billion).

Notice they sold off IBM, boosted Apple. I would not read this as a sign that IBM is failing. IBM still looks promising with their industry lead in Quantum Computing. But for now, they’re mainly a consulting company by revenue.

The Bet

Buffett's S&P destroyed Protégé with 8.5% annually vs. 4.7%.

It’s important to keep in mind he isn’t saying that the hedge fund managers’ research is all for hocus. The parameters of the bet look at returns minus fees. The point that he was trying to make was that low-cost index funds are superior from the vantage point of the average investor. I see a lot of Seeking Alpha readers saying Buffett isn’t taking his own advice because he is actively trying to beat the market himself. No, he’s just aware that if he told the average investor that they should try to beat the market through hedge funds, they would lose all their money. Bets like this are good because they get recorded in history and

This article was written by

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Analyst’s Disclosure: I am/we are long BRK.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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