Warren Buffett’s Berkshire Hathaway Reaches $700 Billion Market Cap: Investors Shouldn’t Be Spooked, Analysts Say

Warren Buffett speaks with CNBC
Nati Harnik/AP / Shutterstock.com

Warren Buffett’s Berkshire Hathaway reached a $700 billion market cap in the first week of January, despite his aggressive buyback strategy in 2021.

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In the third quarter of 2021, approximately $7.6 billion was used to repurchase Berkshire shares — bringing the nine-month total to approximately $20.2 billion, according to the earnings report. The Oracle of Omaha’s conglomerate now sits on more than $149 billion in cash, cash equivalents and short-term Treasury bills, up from $144 billion in the previous quarter, as GOBankingRates previously reported.

Cathy Seifert, VP at CFRA Research, told GOBankingRates that “investors should be prepared to accept a lower level of buybacks as Berkshire stock continues to appreciate, though most are likely to be comforted by the shares’ recent strength.” Seifert added that while the cash pile might be an issue, “it’s nothing new.”

Buffett has struggled to find deals and acquisitions recently in order to deploy his huge pile of cash, an issue Bloomberg described as a “high-class problem of having too much money in Berkshire’s pockets and not enough chances to put that to work in higher-returning assets.”

Related: Here’s the Little-Known Fund That’s Been Outperforming Warren Buffett’s

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Buffett, however, has  defended his buyback strategy — notably in his annual letter to shareholders in February.

“Last year we demonstrated our enthusiasm for Berkshire’s spread of properties by repurchasing the equivalent of 80,998 ‘A’ shares, spending $24.7 billion in the process,” he wrote in the letter. “That action increased your ownership in all of Berkshire’s businesses by 5.2% without requiring you to so much as touch your wallet. Following criteria Charlie and I have long recommended, we made those purchases because we believed they would both enhance the intrinsic value per share for continuing shareholders and would leave Berkshire with more than ample funds for any opportunities or problems it might encounter. In no way do we think that Berkshire shares should be repurchased at simply any price. I emphasize that point because American CEOs have an embarrassing record of devoting more company funds to repurchases when prices have risen than when they have tanked.”

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In June, Berkshire Hathaway made a $500 million investment in digital bank Nubank — a bank recently recognized as one of the most influential companies in the world by TIME — a move that could seem surprising at first glance, but makes sense from a strategic perspective, some experts say.

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In December, the bank went public– under the ticker “Nu” on the New York Stock Exchange (NYSE) — in a $41.5 billion valuation. This valuation makes the Nubank move one the largest initial public offerings (IPOs) of the year.

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About the Author

Yaël Bizouati-Kennedy is a former full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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