Berkshire Hathaway
Investors also pay close attention to what Buffett is doing with the cash generated by Berkshire's businesses. He has a knack for buying at opportune times early in market cycles. So, it's interesting that Buffett is not being aggressive with acquisitions despite having $149.2 billion in cash, a record amount for Berkshire. The one stock he is aggressively buying is Berkshire as he bought back $7.6 billion in the quarter which is a little more than 1% of the company's total market cap. In total, Berkshire has bought back $20.4 billion in shares and is likely to eclipse last year's record of $24 billion in buybacks.
Inside the Numbers
In Q3, Berkshire saw an 18% gain in operating profit to $6.5 billion. Investors use operating profit as the company's net income can swing wildly due to its stock holdings. Berkshire's business units benefited from the recovery in the industrial sector which was positive for its utilities, railroad, and energy holdings.
The company said that demand is almost back at pre-pandemic levels. Operating earnings from the railroad, utilities and energy segment grew 11% to $3.03 billion. Given recent economic data and coronavirus trends, there's no reason to expect that this recovery won't continue.
Berkshire's cash holdings increased to $149.2 billion from $144.1 billion in Q2. Notably, Buffett hasn't made a sizeable acquisition as the market is near valuation levels that he tends to be less inclined to make large purchases.
Stock Price Outlook
Berkshire shares are performing quite well in 2021 after underperforming in 2020. Both its equity holdings and business units are positive contributors to net income. Since May, the stock has been consolidating and looks likely to break out higher given earnings momentum and an improving macro environment.
