By Nicole Friedman
Berkshire Hathaway Inc. repurchased $928 million of its stock in the third quarter, a rare move that indicates Chairman Warren Buffett sees a dearth of appealing investment options for his company's large cash pile.
Berkshire hasn't made a major acquisition since it bought Precision Castparts Corp. for $32 billion in 2016. Mr. Buffett is a value investor who is best known for striking deals when prices are low. More than nine years into a bull market, he has struggled to find large investments that are attractively priced.
Meanwhile, Berkshire's many businesses, such as Duracell, Geico and BNSF Railway, have continued to generate cash.
Though Berkshire's buybacks were small relative to its balance sheet, they represent a shift in the company's willingness to return cash to investors. Berkshire hasn't repurchased shares since 2012, when it bought back about $1.3 billion in stock, mostly from one longtime shareholder.
Mr. Buffett has long argued that he could better increase shareholder value through investments than through buybacks or dividends. But pressure to buy back more stock has risen in recent years as Berkshire's cash pile has grown.
The Omaha, Neb., conglomerate held $103.6 billion cash at the end of September, down from $111 billion at midyear, the company said Saturday.
U.S. companies are buying back record amounts of stock this year following the 2017 tax law overhaul.
Berkshire said Saturday that its third-quarter net earnings soared, boosted by unrealized gains in its equity investments. Berkshire reported net earnings of $18.5 billion, or $11,280 per class A share equivalent, from $4.07 billion, or $2,473 a share, in the year-earlier period.
Berkshire's earnings are volatile due to an accounting rule that went into effect this year requiring companies to include unrealized investment gains or losses in their net income. Quarterly changes in the value of Berkshire's stock investments can have a big effect on its net income.
Operating earnings, which exclude some investment results, rose to $6.88 billion from $3.44 billion in the year prior. Mr. Buffett has said operating earnings are more reflective of Berkshire's performance.
Berkshire changed its buyback policy in July. Previously the company could repurchase shares if the stock price was below 120% of book value. Under the new policy, Berkshire can buy back shares if Mr. Buffett and his business partner Charlie Munger believe that the stock price is below Berkshire's intrinsic value.
Mr. Buffett said on CNBC in August that Berkshire had bought back some shares "at what we know is a price where the continuing shareholders are going to be better off because we bought it."
Berkshire bought back shares at an average price of $312,806.74 per A share and $207.09 per B share. Mr. Buffett has cautioned shareholders in the past that there is no price at which he would definitely repurchase shares.
Mr. Buffett defended buybacks against criticism in his 2016 letter to shareholders. Buybacks are a plus for shareholders as long as a company's shares are undervalued, he said: "The question of whether a repurchase action is value-enhancing or value-destroying for continuing shareholders is entirely purchase-price dependent."
Book value rose to $228,712 a Class A equivalent share as of Sept. 30, a 8% increase for the first half of the year. Last year, Berkshire reported a 8.9% increase in book value for the comparable nine-month period.
Class A shares closed Friday at $308,411, up 3.6% for the year.
In recent months, Berkshire has invested about $600 million two big financial-technology companies focused on emerging markets. The deals were led by Todd Combs, one of Berkshire's two portfolio managers.
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