- Berkshire Hathaway’s Q3 earnings report revealed a nearly $1 billion stock buyback.
- Most of the money spent buying Berkshire Hathaway shares was focused on the cheaper Class B shares.
- Class B shares of Berkshire Hathaway (BRK.B) provide a realistic option to invest with Warren Buffett.
Berkshire Hathaway reported Q3 earnings on Saturday, including news that operating profits had more than doubled year-over-year. The bigger news, though, appears to be the revelation that the company went on a stock-buying spree in July, August and September, including spending nearly $1 billion on its own shares.
Shares of Berkshire Hathaway were up 5 percent on Monday, Nov. 5 and continued to make modest gains on Tuesday after the news of Buffett’s company’s investment broke.
Big Profits, Big Investments in Third Quarter for the Oracle of Omaha
In addition to soaring profits, Berkshire revealed that net purchases of stock through the first nine months of the year were at $24.4 billion, meaning the company more than doubled the $11.8 billion in purchases it had made through June. Given Buffett’s renowned patience and penchant for value, that could indicate that the Oracle of Omaha sees opportunity in the current market.
Perhaps more telling, though, was the news that the company had purchased some $927.57 million worth of its own stock. And in the case of Berkshire — where investing in equities is a core business — the move can be interpreted as Buffett et al finding their own shares available at an attractive price.
If history is any judge, Buffett and his Berkshire colleagues have a good sense of when their stock might be undervalued. The last time Berkshire opted for share buybacks was in December 2012, and shares gained over 140 percent since then while the S&P 500 climbed just 92 percent.
Class B Shares Could be Your Ticket to Investing Like Buffett
Notably, it was the Class B shares that Buffett was buying up most. Of the $927.57 million Berkshire invested in its own stock in Q3, over $850 million of that was used to buy the Class B shares — some 4.1 million of them at an average price of $207.09 — potentially pointing to Buffett seeing more value there than in the Class A shares. And that could be especially important for individual investors.
Although plenty of people want to invest in Warren Buffett, most have also decided that they’re not interested in taking out a second mortgage to do so — one share of Berkshire Hathaway’s Class A stock goes for over $325,000 at the moment.
Fortunately, stocks like Berkshire Hathaway or Alphabet (GOOGL) will offer alternate share “classes” that still confer ownership rights but don’t include the same voting rights when it comes time to elect board members. That’s a distinction that would matter very much to big-time, activist investors who want a say in how a company is managed — someone like, say, Warren Buffett — but don’t necessarily have much value for retail or retirement investors.
Berkshire Hathaway created its Class B shares in 1996. And though you need to buy about 200 shares to get the same voting rights as a single share of Class A, you would need to buy about 1,500 shares to hit the same price point, which makes Class B shares the better deal in more ways than one.
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- Watch: We Know Warren Buffett’s Best Investing Secret, Do You?
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This article is produced for informational purposes only and is not a recommendation to buy or sell any securities. Investing comes with risk to loss of principal. Please always conduct your own research and consider your investment decisions carefully.