With a market value exceeding $1 trillion, Buffett thinks Berkshire Hathaway is also expensive?

Berkshire reduces repurchases, reserves large amounts of cash and U.S. Treasuries. Warren Buffett's investment company Berkshire Hathaway (BRK.A.US) disclosed in August that after making large repurchases in multiple quarters before, recent stock repurchases have slowed significantly. According to the documents, Berkshire repurchased approximately $3.45 billion of stock in the second quarter, the smallest quarterly repurchase since 2018. In the second half of 2020, the company repurchased approximately $9 billion of stock each quarter. Buffett's right-hand man is also selling stocks - on Thursday, September 12, Ajit Jain, Vice Chairman of Berkshire Hathaway's insurance business, sold Berkshire Class A shares worth $1.39 billion, cutting his holdings by more than half. Do they think Berkshire is too expensive? On August 28, Berkshire's market value surpassed $1 trillion for the first time, making it the first non-tech industry company in the United States to join the "trillion-dollar club". However, joining this group does not mean a permanent stay. Tesla, Inc.'s market value has since dropped to $736 billion, while Berkshire's current market value is $965.9 billion. Despite Buffett disposing of a large number of stocks and slowing down repurchasing its own stock, Berkshire has reserved close to $277 billion in cash. Buffett: Berkshire "cannot have amazing performance" Many analysts believe that Berkshire's stock price is overvalued, and Buffett seems to think so too. Bill Stone, Chief Investment Officer of Glenview Trust, views Berkshire as the "ultimate stable stock" - with a rock-solid balance sheet, trusted leadership, and a wide range of businesses. However, he advised clients to wait for Berkshire's stock price to pull back before buying more this week. Stone said: "It's not an attractive buying opportunity right now, frankly, were not eager to significantly increase our holdings right now." In a letter to shareholders in February of this year, Buffett warned that Berkshire's size is vast and it currently lacks attractively priced acquisition targets, so the company "cannot have amazing performance". Buffett often argues that stock repurchases can benefit shareholders - but only if done at the right price, which is favorable to existing shareholders. "Buying back at a premium is stupid," he said. In August, Berkshire also stated in its quarterly report: "The company will only repurchase stock when Buffett believes the price is below Berkshire's conservative estimate of value." However, high valuation does not necessarily mean that Berkshire or the entire market's rise will end. As investors continue to pour money into the market and avoid or ignore bad news, Berkshire's stock may continue to rise. But for those cautious investors, a high valuation may make them pause. Some investors say, "If Buffett isn't buying his own stock, why should we?" What does Buffett like now? In recent months, Buffett has significantly reduced holdings in various stocks. According to reports, Berkshire reduced its holdings in Apple Inc. by over 389 million shares in the second quarter, worth about $82 billion, a decrease of 49.3% from the first quarter, with its allocation in the investment portfolio dropping by over 10 percentage points. Berkshire also liquidated its entire position of 6.12 million shares ($840 million) of cloud computing star Snowflake; reduced its holdings in Chevron Corporation by 4.37 million shares ($680 million); and cut its holdings in financial holding company COF by 2.65 million shares ($367 million). Now, Buffett doesn't even want his own stock, what does he like? Berkshire stated that if repurchases would reduce the company's cash and U.S. Treasury holdings to below $300 billion, the company would not repurchase, but this scenario is almost impossible. As of the end of June, Berkshire's cash reserves were close to $277 billion, largely from the significant sale of stocks, especially Apple Inc. stock. Aash Shah, Chief Investment Officer and Senior Portfolio Manager at Summit Global Investments, said: "Ultimately, Buffett seems to believe that the best investment right now is cash and U.S. Treasuries." This article is reprinted from "Wall Street News" by author Jiang Zihan; GMTEight Editor: Jiang Yuanhua.