Theres no place to invest 900 billion yuan! Shareholders of Buffetts company resent: bull market inaction

category:Finance
 Theres no place to invest 900 billion yuan! Shareholders of Buffetts company resent: bull market inaction


But in the context of the US stock market continues to set new highs, Warren Buffett, the God of stocks, is busy hoarding cash. Berkshires huge cash reserves have risen to $128 billion, or 900.7 billion yuan.

Berkshire net $16.52 billion in the third quarter

On Saturday night, Berkshire Hathaway, Buffetts industrial and insurance conglomerate, released its latest results.

In the third quarter of fy19f, the companys operating revenue was US $7.858 billion, up 14% year on year; the net operating revenue of insurance underwriting was US $440 million, down 0.2% year on year. The company achieved a net profit of US $16.52 billion, which is still far higher than the market expectation of US $8.884 billion despite a 10.87% year-on-year decline.

Berkshires net income from underwriting operations in the third quarter was $440 million, down 0.2% year-on-year, according to the results. In the third quarter, the operation revenue of railway, public utilities and energy business reached US $2.64 billion, up 6.4% year on year. On September 30, the insurance float was about $127 billion, an increase of $4 billion over the same period in 2018.

Net profit for the first nine months of 2019 was $52.258 billion, compared with $29.413 billion for the same period last year. Earnings per share of class A shares in the first nine months were $31944, compared with $17885 in the same period last year. Earnings per share of class B shares in the first nine months were $21.30, compared with $11.92 in the same period last year.

Berkshire said that the net profit data of the third quarter and the same period last year included a large number of unrealized stock investment profit / loss data. In recent years, Berkshire has stressed that they published the data in order to match the adjustment of general accounting standards, and these data do not have the actual reference value at the investment level.

Apples market value of $57 billion

Berkshires bright net profit is mainly from its stock investment, especially its bet on apple.

Although Berkshire has yet to make a major acquisition, it has been taking steps in recent years to absorb more reasonably valued technology stocks. Berkshire Hathaway still owns a large number of value shares such as Coca Cola, Bank of America, Wells Fargo and kafheinz. But the companys biggest stake is in apple, and even a small stake in Amazon.

According to the report, as of September 30, 2019, about 66% of the total fair value of the companys equity securities investment is concentrated in five companies: Apple company $57 billion; Bank of America $27.8 billion; Coca Cola $21.8 billion; Wells Fargo Bank $20.2 billion; American Express company $17.9 billion.

As of the first half of this year, the above figures are Apples $50.5 billion, Bank of Americas $27.6 billion, Coca Colas $20.4 billion, Wells Fargos $20.5 billion and American Expresss $18.7 billion.

Buffetts Berkshire Hathaway is Apples third-largest shareholder, with a 5.52% stake, behind pilot investment and Blackstone. During the third quarter of this year, Apples share price showed strong performance, with a cumulative increase of 13.59% and a market value increase of $81.849 billion.

Buffett has enjoyed buying 10 million shares of Apple since 2016. At present, he holds nearly 250 million shares of apple (about 5.5% of the shares issued by Apple). Now, the book value of the investment is as high as 60 billion US dollars, equivalent to about 400 billion yuan.

Whether its earnings and revenue in the third quarter of this year or performance guidance in the fourth quarter, Apples performance is better than the market expected.

After Wednesdays trading, Apple released its fourth quarter report, the third quarter of this year in the Gregorian calendar. According to the report, Apples earnings per share and operating revenue in the third quarter reached a new high in the companys history in the third quarter, and the revenue of service business reached a new high in all quarters.

Ignore the bull market

Buffetts hoarding of 128 billion US dollars is a record high

The results show that Berkshires huge cash reserves are still expanding, and no large-scale acquisitions have been made to accelerate growth. Its current cash reserves are $128 billion, up from $122 billion in the second quarter, a record high.

In fact, Berkshire Hathaways performance in the capital market this year is bleak. So far this year, Berkshires stock performance has lagged far behind the S & P 500 and the market in the past five and 10 years. As of Friday, Berkshires AB shares have all risen less than 6% since the beginning of the year, while the S & P 500 has risen 22.34% over the same period.

Buffett has said he hopes to use the companys pile of cash for an elephant scale acquisition. The problem is that the market rebound has made any possible acquisition target very expensive, and Buffett has said he does not want to overspend on the deal.

In a report in October, UBS Group AG analyst Brian Meredith said part of Berkshires underperformance was due to a disappointing pile of idle cash. Buffett has been looking for big acquisitions, but the overvalued U.S. stocks have kept him from selling.

But Buffett doesnt do nothing with so much cash. Buffett actually turned to share buybacks to deal with some of his cash. By the end of September this year, he had bought back $2.842 billion of shares. Among them, US $700 million worth of shares were repurchased in the third quarter, up from US $442 million in the previous quarter. But analysts at UBS said the figure was small compared to Buffetts huge cash holdings.

Previously, the company was not allowed to buy back shares. Last year, the board of directors changed a rule allowing the company to begin buying back billions of dollars worth of shares, which some analysts criticized for driving up the share price.

Exit in the second half of the year

For Buffetts hoarding of cash, there has been a long-term withdrawal of investors, but also by Berkshire Hathaways old shareholders verbal criticism..

He even thinks Buffett and his team missed the whole bull market, for example: from March 2009 to the end of the third quarter of this year, Berkshire Hathaways stock rose only 269%, while the S & P 500 index rose 370% over the same period. He felt that in a bull market, holding a large amount of cash was a considerable growth barrier for the company.

As a result, David Rolfe reduced his stake in Berkshire in the second quarter and completely closed his position in the third quarter.

Mr Rolfe wrote that he had long regarded Berkshires cash as a valuable call option, because the opportunity lies in the hands of the best allocators..

However, as Buffett continues to complain that Berkshire lost to radical private equity firms in the search for deals, he is disappointed by Berkshires continued cash growth.

Rolfe wants to know why Buffett continues to be at a disadvantage in the acquisition game - very unlike Buffett in our view, he wrote. Buffett has been trying to position Berkshire as the ideal home for a private company that wants to remain autonomous, but few are willing to accept it. Berkshire is also one of the sources of rescue funds, but during the long bull market and economic expansion, there is little demand for rescue funds.

Source: China Fund News Author: Qiao Mai editor in charge: Wang Xiaowu Gu NF