Berkshire Hathaway Inc. (NYSE:BRK-B) shares closed 1.5% higher at $529.42 on August 10 after gaining as much as over 3% during the session. The Class A shares rose as much as 3.3%, reaching their highest level since the day before Warren Buffett announced he would step down as chief executive. The market was not simply responding to another profitable quarter.
Berkshire-defined operating earnings, a non-GAAP measure of performance across its businesses, rose 16% to $12.98 billion. The bigger surprise was how quickly Greg Abel had started putting Berkshire Hathaway Inc. (NYSE:BRK-B)'s enormous liquidity to work. Berkshire purchased $23.5 billion of publicly traded stocks during the second quarter and repurchased $4.5 billion of its own shares.
In July, it deployed at least another $10.1 billion through additional buybacks and the acquisition of Taylor Morrison Home Corporation. The question is whether this marks the beginning of a more active capital-allocation era or merely a busy stretch that still leaves Abel with hundreds of billions of dollars to deploy. The most important number in Berkshire Hathaway Inc. (NYSE:BRK-B)'s report was not earnings.
It was the nearly $20 billion difference between the stocks it purchased and sold. Berkshire bought $23.5 billion of equities while selling approximately $3.7 billion during the second quarter. That ended 14 consecutive quarters in which the company had been a net seller of stocks.
The selling streak helped Berkshire's liquidity climb to record levels. At the end of March, cash, cash equivalents and U.S. Treasury bills totaled approximately $397.4 billion on the balance sheet.
After deducting $17.2 billion of unsettled Treasury purchases, Berkshire Hathaway Inc. (NYSE:BRK-B) reported a net figure of $380.2 billion. Investors could understand why Buffett refused to chase expensive assets. The harder question was whether Berkshire had become too large to find enough opportunities capable of materially affecting per-share value.
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