Why Warren Buffett Has Slowed Down His Stock Buying Pace.

Warren Buffett slowed stock purchases dramatically in the second quarter even during the big correction. According to analysts, it may store capital for other purposes.

Berkshire Hathaway’s net stock purchases fell to $3.8 billion in the second quarter, compared with more than $41 billion in the first quarter, the conglomerate’s quarterly reports showed.

Buffett’s relatively quiet activity may come as a surprise to some, as the S&P 500’s biggest one-quarter decline since March 2020 created a good environment for buying on the dip. After all, the legendary investor dived into the market to pick up trades in the first quarter, when the S&P 500 fell just 5%.

Analysts say Buffett can manage liquidity needs before his Allegany deal closes in the next few months.

The conglomerate’s deal to buy the Alleghany insurer for $11.6 billion, or $848.02 per share, in cash is expected to close in the fourth quarter of this year. The acquisition would mark Buffett’s biggest deal since 2016.

Berkshire is expected to increase its stake in Occidental Petroleum to more than 20%. Buffett has steadily increased his stake in the oil giant since March, giving Berkshire a 19.4 percent stake worth about $10.9 billion.

Berkshire can also save money to buy more of its own stock. The conglomerate said it spent roughly $1 billion on share buybacks in the second quarter, a slower pace of buybacks than the first quarter, when the company bought back $3.2 billion of its own stock.

Now that Berkshire’s stock has dipped following the second-quarter selloff, the conglomerate may ramp up buybacks again next quarter.

The conglomerate’s Class A shares fell more than 22% in the second quarter and are now down nearly 20% from an all-time high reached on March 28. Stock buybacks typically depend on whether Buffett believes the stock is trading at a steep enough discount to its intrinsic value and other uses of cash.

Berkshire Hathaway Energy?
Berkshire’s latest quarterly report also revealed that Vice Chairman Greg Abel, Buffett’s potential successor, sold his 1 percent stake in the company’s Berkshire Hathaway Energy division for $870 million.

Berkshire now owns 92% of Berkshire Hathaway Energy, with the rest owned by the family of the late billionaire philanthropist Walter Scott, who died last September aged 90.

If Walter Scott’s family were interested in liquidating their 7.9% stake, it would require nearly $7 billion.

Huge investment losses

While Berkshire reported a 38% jump in operating profits, the conglomerate was not immune to the overall market turmoil, with a whopping $53 billion loss on its investments in the second quarter.

Buffett again asked investors not to focus on quarterly swings in his capital investments.

“The amount of investment gains/losses in a given quarter is usually meaningless and provides net earnings per share figures that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said in a statement.

Most of the losses were within Berkshire’s largest positions, including Apple ($34 billion loss for Berkshire’s position in the second quarter), Bank of America ($10 billion loss) and American Express ($ 7 billion dollars). These positions have recovered some of the losses in the current quarter.

 Dealer Anatoliy Pavlov

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