Warren Buffett’s Berkshire Hathaway Berkshire Hathaway reported its second quarter results over the weekend.
Here are five key takeaways that could be useful for Australian investors:
1. A Berkshire share buy back might be on the cards
Berkshire amended its common stock repurchase program in July with the new policy allowing Warren Buffett and Charlie Munger to approve share buy backs as they see fit.
Critically, whilst the old policy did not allow buy backs above 1.2 times Berkshire’s book value, the new policy provides Warren and Charlie with sole discretion to approve buy backs as long as they deem the price to be below their estimation of Berkshire’s intrinsic value.
My takeaway from that is the Oracle of Omaha is keeping with the times and no longer sees price book value as an appropriate valuation metric for his business. Also, given that Berksire has under performed this tech driven market over the last year and Buffett hasn’t made a significant acquisition in two years (because there isn’t any good deal flow for the amount Berkshire has to invest), perhaps Buffett feels that Berkshire may be relatively under valued.
2. Everyone needs cash for a rainy day, for Buffett its US$20 billion
Berkshire’s SEC filing mentioned that, “financial strength and redundant liquidity was of paramount importance at Berkshire” and that the company would not reduce its overall cash and cash equivalent balance to below US$20 billion.
I think it’s an important lesson for all prudent investors to learn, even the best investors out there keep a little bit of cash aside in case of an emergency.
3. Berkshire keeps buying Apple despite trillion dollar valuation
Despite Apple Inc. being the most valuable company in America, Berkshire has kept investing more and more into it.
My takeaway from that is it’s never too late to buy quality businesses and all that matters is how they will perform in the future not how they have performed in the past.
4. Volatility is here to stay. Focus on the business, not equity prices
Berkshire’s report emphasized that volatility was an inherent part of investing in shares and that changes in share prices were “generally meaningless in understanding our reported results or evaluating the economic performance of our businesses”.
I think the same applies to the shares in your portfolio too.
5. The US economy keeps growing
A read through the report shows how well the companies owned by Berkshire have performed. These companies are spread across many sectors of the US and it provides a glimpse into the overall health of the US economy.
For us investors in Australia, gaining some exposure to US equities could open up some interesting opportunities.
When a veritable investing and entrepreneurial genius speaks, it pays to listen.
In fact, he's now preparing a $100B "war chest" to invest entirely in this "terrifying" new technology, which could spell huge profits for investors.
Kevin Gandiya has no position in any of the stocks mentioned.
You can find Kevin on Twitter @KevinGandiya.
The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.