Warren Buffett’s Berkshire Hathaway has $325 billion in cash on hand, but the billionaire investor is not rushing to spend it. The company did not repurchase any of its own shares in the third quarter, ending a six-year streak of stock buybacks.
Berkshire Hathaway’s decision signals that its stock might be overvalued. Analysts Cathy Seifert and Robert Korajczyk say Buffett will only buy back shares when he believes they are undervalued. The company’s Class A stock is trading at 1.6 times its book value, higher than the implied value of $500 per share.
Buffett has been clear that he would not buy back shares if he thinks they are overvalued. Analyst Russ Mould says Berkshire Hathaway’s lack of buybacks and cash pile imply Buffett is concerned about the economy. The company’s decision also reflects a cautious market environment, according to Aswath Damodaran.
As Berkshire Hathaway continues to grow its cash holdings, it may signal that Buffett doesn’t see attractive investment opportunities in the current market. The billionaire investor’s risk-off mentality suggests he is prepared to wait for a better entry point.
Source: https://edition.cnn.com/2024/11/05/business/warren-buffett-berkshire-hathaway-stock-overpriced/index.html