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Buffett’s Berkshire Hathaway Made $9billion Share Buybacks in the Third Quarter of 2020

Buffett's Berkshire Hathaway Made $9billion Share Buybacks in the Third Quarter of 2020

Berkshire Hathaway, a multinational holding company owned by Warren Buffett made a total buyback of shares worth $9.3 billion. The company’s third-quarter reports also reported below expectations operating results for the quarter. According to the third-quarter report released on Saturday, the COVID-19 pandemic might still bring more losses to the company despite increased revenue from stocks owned in multinational companies such as Apple.

Business experts have expressed their encouragement over the company’s total income which reduced by just 3% of the total revenue recorded last year. Berkshire Hathaway bought back $9.3 billion of its underperforming stock during the third quarter totaling almost $16 billion buybacks from this year. During the second quarter, Berkshire had reacquired $5.1 billion of its stock.

“The buybacks will be an encouragement for the market,” Cathy Seifart, an analyst at CFRA Research stated. “Other companies stopped buybacks to prepare for different eventualities of the pandemic, though it is easier for Berkshire because it doesn’t pay dividends.”

Operating profit for the quarter as reported by Berkshire is $5.48 billion, which is a reduction of 32% from $8.07 billion recorded in the third quarter of 2019. Net income however increased, with Berkshire making $30.1 billion from its holding companies such as Apple Inc., from the $16.5 billion that was recorded last year, Yahoo News reports.

The holding company made $24.8 billion in profit from its investments such as Apple and Coca-Cola. Apple’s stock increased by 27% during the third quarter, totaling $111.7 billion, the biggest of Berkshire’s holding, asking up about 46% of its investments. Experts believe that Berkshire should have recorded more profit from Apple, during the quarter and are speculating that Berkshire must have sold some of its Apple stock.

Berkshire recorded about $26.3 billion profit during the second quarter of the year but recorded a kiss of almost $50 billion during the first quarter and ended the business year with about $145.7 billion in cash and its equivalents, after investing $6 billion in five Japanese trading houses companies. Berkshire Hathaway also supported the Initial Public Offering (IPO) of Snowflake Inc, a San-Mateo based cloud data storage company.

Some of Berkshire’s investments are not doing so well during this period. Precision, which the company acquired in 2016 was greatly affected by the turn-down in the aerospace industry. Precision was acquired for $32.1 billion, the largest acquisition deal accredited to Berkshire. The company recorded a reduction of 80% in pre-tax gains and is expected to lose 40% of its employees before the end of the year.

Meaning about 13,400 workers in Precision– 3,400 more jobs than Berkshire initially announced have been lost. Berkshire recorded no major reduction in the value of the stock during the quarter but explains that the COVID-19 pandemic could mandate more writedowns. Gains from Berkshire’s insurance company Geico reduced by 58% to $802 million caused by lower premiums, the pandemic as well as Hurricanes Laura and Sally.

BNSF railway also recorded an 8% reduction in profit but Berkshire’s energy companies and real-estate brokerage improved with the real-estate industry seeing more people purchasing homes as a result of reduced interests.

Source: cnbc.com

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