Berkshire Hathaway Doubles Buybacks as Profits Slide

Berkshire Hathaway said Saturday that it bought back its own shares at a much faster clip in the third quarter, more than doubling its repurchase activity. The move came as the conglomerate's operating profit and overall earnings declined, leaving investors to weigh a shrinking profit line against a larger commitment of cash to buybacks.

Repurchases are a tool Berkshire uses when management believes its stock trades below the value of the underlying businesses. The board's buyback framework allows the company to buy shares when it considers the price attractive, and management has historically been reluctant to repurchase at prices it views as full. A sharp increase in buybacks therefore suggests that leadership saw the stock as undervalued during the quarter, or at least cheap enough to justify spending heavily on it.

The earnings side of the report is the counterweight. Berkshire owns insurance, railroad, utility and manufacturing operations, and a decline in operating profit points to softer results somewhere in that portfolio. Its headline net earnings also depend heavily on investment gains and losses across its large equity holdings, so the bottom line can swing for reasons that have little to do with how the operating companies performed.

For shareholders, the combination is a mixed signal. Buybacks shrink the share count, which can lift per-share value, and they show the company has cash it is willing to deploy. But every dollar spent on repurchases is a dollar not used for acquisitions or held in reserve, and lower profits raise fair questions about the direction of the core businesses. The quarter does not answer those questions on its own. Investors will be watching the full quarterly filing and any comments from management on how long the faster pace of buybacks is likely to last.