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Berkshire: Warren Buffett Does Buybacks, Earnings Remain Strong

Mar. 02, 2021 10:00 AM ETBerkshire Hathaway Inc. (BRK.A), BRK.BABBV49 Comments


  • Berkshire's diversification allowed the company to remain highly profitable, despite the pandemic.
  • The company has ramped up share buybacks in recent quarters, which is highly accretive to EPS growth.
  • Shares look like a solid value right here, despite the sizeable gains the stock has experienced over the last couple of months.
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Article Thesis

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) is a leading conglomerate and one of the favorites among retail investors, despite not paying any dividends. The company continued to do well during Q4, despite the pandemic, as operating earnings remained very healthy while the ongoing equity market rally increased the value of the company's holdings.

Shares have risen a lot in recent months, but they seem to be a solid value still, based on current book value. The fact that Buffett continued to spend billions on buybacks during Q4 underlines that shares can't be overly expensive right now.

Doing Fine Despite The Pandemic

Many companies are impacted by the current pandemic to a large extent, especially sectors such as hospitality, brick-and-mortar retail, travel, etc. A conglomerate such as Berkshire Hathaway naturally benefits from the diversification across its businesses, as not all will be impacted by the pandemic to the same degree.

It is thus not a very large surprise to see that, overall, operating profits for the company did not fare too badly. If some businesses suffer from the impact of the pandemic, others will benefit and see higher profitability. Berkshire Hathaway's insurance operations, for example, benefit from the fact that people stay home more often, which reduces the number of accidents on the country's roads, which results in lower payouts.

Berkshire's railroad and utility businesses also did well in the recent past. As the country still needs many goods moved from A to B, even during a pandemic, and as consumer spending has remained strong, which means that many goods have to be imported and moved from the country's ports to consumers, BNSF has actually fared quite well, despite the pandemic.

Thanks to these factors, Berkshire's operating earnings during the most recent quarter were actually up by 12% year over year - growing despite the

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This article was written by

Jonathan Weber profile picture
Jonathan Weber holds an engineering degree and has been active in the stock market and as a freelance analyst for many years. He is an active author on Seeking Alpha since 2014.    
According to Tipranks, Jonathan is among the top 1% of bloggers (as of August 1, 2023). 

Jonathan is interested in income stocks and value stocks primarily but does also follow some growth stocks. 

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Analyst’s Disclosure: I am/we are long ABBV, EPD, KMI, 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.

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Comments (49)

capitalallocator profile picture
" Right now, the company holds cash and equivalents of $138 billion, which is equal to about 25% of the company's market capitalization. With a cash load like that, Berkshire is well-positioned to make either a range of smaller acquisitions or one or several larger ones"

Jonathan Weber profile picture
@capitalallocator All way too expensive to be taken over
BNSF’s numbers are a mirage. They’re cutting their way to revenue gains. No actual growth and horrible management.
Jonathan Weber profile picture
How do they cut their way to revenue growth?
Nasdaq down, BRK up. We should all get used to it
Capt Jack Daniels profile picture
BRK is mostly trash only his AAPL portfolio has any juice.
Jonathan Weber profile picture
@Capt Jack Daniels
Growing operating profits by 10% during a pandemic is "trash"?
Capt Jack Daniels profile picture
@Jonathan Weber Scamdemic...
there is no medical no serious issue except that the DEMS are using it to increase their power and control.
@Capt Jack Daniels nit meet wit
With the huge amount of dry powder, all the businesses owned outright and the large portfolio of stocks which pays Berkshire billions each year, Berkshire Hathaway is a money making machine.

"Time is the friend of the wonderful business"

- Warren Buffett
Capt Jack Daniels profile picture
Selling AAPL their only winner and buying back their own BRK stock is boneheaded even for someone like saw dust shooter B...
@Capt Jack Daniels Apple is seriously over-valued at the moment, the stake in Apple hasn't diminshed and it makes sense to buy value which is BRK stock at the moment.
Capt Jack Daniels profile picture
@p78980i AAPL isn't even close... give AAPL the same PE valuations as say TSLA and AAPL would be over 10K
josephaoppenheim profile picture
Keep your eye on VZ, now his 6th largest holding. He once bid for Yahoo and Munger just had his Daily Journal talk on Yahoo Finance media. Could Yahoo Finance media be a Berkshire network or somehow something bigger with Berkshire a big shareholder of VZ?
Jonathan Weber profile picture
Thanks for sharing. True, his interest in VZ is interesting!
At 1.3x book Berkshire is a great value these days. The wholly owned businesses (eg RR, BHE and insurance) are carried at acquisition cost unless there’s an impairment (as was the case with PCC). As these businesses as a group continue to grow in value, the gap between book and intrinsic value continues to widen. 1.3x today is better than it was even 3 years ago and better still 5 and 10 years ago.
Jonathan Weber profile picture
Agreed, BRK is worth more than book value for sure
Fully agree that Berkshire is still a solid value with continued upside. I don't think you'll see more buybacks so soon if the stock stays above $250. I agree that Buffett would consider buying a company like KMI, since he loves pipelines (the Biden Admin is not allowing for new ones so far.) I don't agree with your Gilead comment. I can see him buying the stock, but not the whole company. Too much volatility to it imo. He has always bought pharma company stocks, but never the whole company. As for earnings, if the economy continues to expand significantly as expected at the moment, then Berkshire should have a great year, which will ultimately increase book value and then allow for more buybacks in the future if the stock remains around this level. Buffett will not buy back stock for the sake of buying back stock. He'll only do it when he sees it as a value, generally around the 1.3x book level or less. Thanks JW. Great writeup.
Jonathan Weber profile picture
Glad you agree and liked it!
I would add Energy Transfer to the list of possible targets for Buffet. Berkshire would deal with ET's debt and either pay it down or refinance at much better rates. ET is a powerhouse but its debt rating and interest expense hurts it. Berkshire management would also make it far more stable.
Strategic Investor profile picture
@poppy175 Ah, the old, what would buffett buy (WWBB), which can be factored out to WB-squared.

Anyway, it seems to me it's obvious she should buy DJCO; he gets a nice securities portfolio and a seasoned management team with a good track record and of which he is apparently quite fond. It gets BRK into start up tech, as well.

Seems an obvious candidate to me.
ET is an over leveraged dog. I also wouldn't trust their accounting.
@bobbyculpepper "ET is an over leveraged dog. I also wouldn't trust their accounting..."

Nor management.
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