Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) has never spent this much on its own stock in one quarter. The company spent about $9.6 billion on repurchases in the third quarter of 2026. This inches past the nearly $9.3 billion it spent in the third quarter of 2020.
At Berkshire, a buyback also says something about price. The company repurchases shares only if management thinks they cost less than the business is worth.
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And the Class B shares now trade near $570 as I write, about 12% over the average price Berkshire paid in September. I think the record buyback says a lot about what the stock was worth then, and a lot less about what it’s worth at today’s price.
Warren Buffett. Image source: Getty Images.
Buffett’s two tests
Warren Buffett, now Berkshire’s chairman emeritus, spelled out his rule for repurchases in his 2011 letter to shareholders.
“Charlie and I favor repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company’s intrinsic business value, conservatively calculated,” he wrote, referring to his late partner, Charlie Munger.
Intrinsic value is an estimate of what a whole business is worth.
Versions of both tests remain in Berkshire’s latest quarterly filing, which says it can repurchase shares whenever its CEO, after consulting the chairman of the board, “believes that the repurchase price is below Berkshire’s intrinsic value, conservatively determined.” These two roles now belong to Greg Abel and Howard Buffett, Warren’s son.
Berkshire also won’t buy back stock if doing so would push its cash and Treasury bills below $30 billion. And it had around $352 billion in both insurance and other businesses at the end of September, so the first test isn’t a big hurdle.
The program no longer has a set price limit, though. Until 2018, Berkshire wouldn’t pay over a 20% premium to book value (what’s left after subtracting a company’s liabilities from its assets). Based on a book value of about $358 per Class B share at the end of September, that limit would be roughly $429, well under the stock’s 52-week low of about $464. So, Berkshire is buying at prices the old valuation limit wouldn’t have allowed.
