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Berkshire Hathaway Q3 2021 Earnings And Book Value Estimates - Cash Is Trash, Repurchases Are Treasure

Oct. 06, 2021 8:01 AM ETBerkshire Hathaway Inc. (BRK.A), BRK.B157 Comments
Fishtown Capital profile picture
Fishtown Capital


  • Berkshire retains a small 1.8% outperformance versus the S&P 500 at the end of Q3.
  • Berkshire's equity book gained 1% to $297.7 billion.
  • Price/book value improved to 1.29x due to a flat stock price and continued equity and operating earnings.
  • Share repurchases were $6 billion in Q2, down from $9 billion in Q4 2020, but with inflation running hotter and the stock flat, I believe we could see a reacceleration back to the $9 billion/quarter or higher level.

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Berkshire Hathaway's (NYSE:BRK.A) (NYSE:BRK.B) Q3 quarter was likely a "steady as she goes" type of quarter, with the stock rangebound, equity book flattish, and the operating business facing some headwinds for the first time in a

This article was written by

Fishtown Capital profile picture
Individual investor and family office principal with over 20 years of investment experience. I favor fundamental analysis and look for individual issues and asset classes that are out of favor and represent a good risk/reward trade off. I often employ options strategies, covered calls on companies I own that have gotten ahead of themselves, and writing puts on stocks that I'd like to own at lower prices.Educational background Finance MBA (NYU Stern) with Computer Science undergraduate.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BRK.B either through stock ownership, options, or other derivatives. 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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Comments (156)

If Warren Buffet, the investing king himself is buying billions of dollars worth of BRK.B shares. It's a pretty clear sign to me to buy them as well, I might not be the best investor. But I can sure copy him!
sgt.red.blue.red profile picture
@Fishtown Capital Continue to hold, although have not added new money since around $120,000 level. New dollars have been to growth.
@sgt.red.blue.red only the A's for you? Nicely price on them!
your estimate for operating profit was spot on, even down to the segments. well done
@greppo11 nailed it right?
Fishtown Capital profile picture
@MJB007 @greppo11 Thanks! I come back to these to see where I went wrong, but this quarter I got this pretty spot on. Glad to see the business are performing as expected.. slow growth, couple with buybacks makes this still a good investment in a crazy market.
@Fishtown Capital Good stuff. I have owned this one for decades and have been adding to it alot more recently... its time to own more of BRK!
With the money printing presses running wide open WB needs to buy gold and gold mining stocks; he could add natural resource stocks; when a suitable acquisition target becomes available he can liquidate and pounce..
Nashman: I don't own any VIAC stock; Morningstar research said the co. had a fair value of 61$ a share; the current ceo could run the co. WB has the opportunity to acquire a great company at a bargain.price; this is a rare opportunity. VIAC closed at 39.8
@Billybobp fair enough . Keep in mind that Morningstar is notoriously wrong with their price targets. The company does a better job when it comes to fund rating
thirdcamper profile picture
@nashman Wall Street analysts have price targets - that is, they guesstimate where they think the stock will be after a year. Morningstar gives fair value estimates. These are two different things.
The cash is insurance float. It's a liability. It's a form of debt. As the float grows, the so-called "cash pile" grows. It's actually an "insurance float pile", other people's money.

Berkshire has $142 billion of insurance float, as of Q2 2021. Here is a chart of Berkshire's cash+bonds to float ratio since 1972:


As you can see, Berkshire always holds the float as cash+bonds. The only exception is 2008, where float was used to buy preferred shares (very similar to a bond).

All Berkshire shareholders should come to terms with this reality. The float is "other people's money" and Berkshire has, for 50 years, held cash+bonds to cover it. It is unlikely that Berkshire will deviate from this policy in the future.
The way to get ahead in investments is to buy entities when they are undervalued with great prospects; VIAC fits the bill as it is a screaming bargain with a PE ratio of 9.
nashman: WB should buy VIAC because it is way under valued where as DIsney or Comcast are fully valued or slightly over valued; the way to get ahead
@Billybobp But , he isn't going to buy it or those other companies . The the truth of the matter is that you just want him to buy it so it helps your trade.
Briar profile picture
@nashman I agree and trust Warren: he knows way more than we do!
Looks like, with a strong 4th Qtr, BRK is setting up for record Operating Earnings in 2021. Add in fewer shares outstanding and the per share number should look even better.

What's not to like?
Hermann Balck profile picture
So basically getting the Operating Businesses at a 13 PE and Stock Portfolio at a 20% discount. Long BRK A BRK B.
Funny thing about cash and WB. To me, it looks like "Do as I say, not as I do"
Oushi profile picture
Great article!.
Just a question, you mentioned: "Berkshire's equity book gained 1% to $297.7 billion (not including KHC). Why KHC is not relevant for your analysis?
Once again, thanks for this article.
Fishtown Capital profile picture
@Oushi You're welcome and thanks for reading.

It's an accounting thing: Because Berkshire owns over 20% of KHC, it is given equity method treatment, so it isn't "counted" the same way. Instead, it's share of earnings are counted in Berkshire's operating earnings (under "Other")
I only wish Warren would consider DIVIDENDS instead of repos.
Fishtown Capital profile picture
@Cmcnew I think there could be a place for both. I've discussed this in past articles.
@Cmcnew if he did the stock price would decline by the estimated present value of the taxes paid on dividends at the shareholder level.

Dividends are the distribution of earnings, not the creation of them.

As long as the buybacks are done at or below intrinsic value, your total, after tax return will be greater under buybacks.

So if you prefer a lower return on your investment, and therefore less total wealth from your position, advocate for dividends.
Fishtown Capital profile picture
@cjdwim Very academic view. In practice, it's really not that simple.

1, You're ignoring that many folks hold BRK in tax advantaged accounts. For them, them distribution is tax free.

2, Repurchases at the $25-35 billion/year range will absolutely have some impact on the stock price. Perhaps repurchasing in the $15-20 billion range could allow for better (lower) repurchase prices?

3. You'll still owe the tax when you sell. Yes, for people with very long investment horizons, it helps to compound. But I'll also wager that capital gains rates will be higher in the future, perhaps dramatically, then they are now. So there's that.

Take a look at Berkshire's portfolio. It certainly seems that they do not have any aversion to the companies they own paying out dividends..
hugh01 profile picture
Freakin hell. When is WB gonna do something? It was a 10-year bull cycle by 2019, the 2 vs 10-year bond yield inverted and there were signs of a global pandemic back in late 2019 from Wuhan. The market crashed by about -35% in March 2020 and he still did nothing!!!

Over 95% of the portfolio/market cap is USA domiciled. Is it really that hard to find more companies/stocks to buy outside of USA? He won't even consider allocating 10% of cash towards start-ups or VC to be run by Todd or Ted?
InvestRite#1 profile picture
@hugh01 You mean in that he did nothing, other than buying back shares
06 Oct. 2021
Great article! Thank you.
Fishtown Capital profile picture
@jwed Thanks for reading!
Sheri Redstone wants to sell VIAC.
hugh01 profile picture
@Billybobp Rubbish company with no moat.
WB needs to buy VIAC for around 26 billion dollars; it has a fair value of 61$ a share; they have a great ceo named Bob Bakish. They own Pluto and it is giving Roku TV a run for it's money; they could even put Charlie in the movies.
WB needs to buy VIAC foraround 26
@Billybobp Why do you think he would be VIAC ? If anything, he would go into Comcast or Disney instead
Normally buybacks are a total waste, but with Berks structure they're acceptable.
@firsTraveler More than acceptable. I think it ranks dead last in terms of price to cash flow ratio among all healthy large companies with more than $100 billion market cap. The silver lining of this dud performance is its stock is ripe for repurchases. At least no one can claim management overpaid.
Briar profile picture
@carl.s.berg I agree! Here is an interesting dilemma: would you rather buy a stock paying a dividend and selling at a premium to BV, or one selling at a discount but not paying a dividend, but, also, prudently repurchasing shares? The latter is Berkshire: in the long run it will allow you to eat better.
j. hughes profile picture
I see the cash as ammunition for his "big elephant gun".
I will not be surprised if we see the elephant soon.
@j. hughes it would be so awesome
Gprattalpha profile picture
@j. hughes I hope so! When was the last time BRK issued debt to fund an acquisition?
@Gprattalpha when they raised $8B to fund BNSF.
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