Compounding in action

No surprise for regular followers: Berkshire Hathaway remains a key investment in our portfolios.
Q2 operating profit rose 16% to almost $13bn, although underlying growth was closer to 6% once currency effects are stripped out. More interesting to us is what happened on capital allocation.
After 14 consecutive quarters of net equity selling, Berkshire became a major buyer again: around $23bn of equities purchased versus $3bn sold, including another $10bn in Alphabet.
Berkshire also repurchased $4.5bn of its own shares in Q2 and another c.$3.4bn in July. Given Berkshire’s traditionally disciplined approach to buybacks, this is a strong indication that management believes the current share price does not fully reflect the underlying value of its businesses.
And the firepower remains exceptional: around $360bn of cash and Treasury bills at quarter-end, while Berkshire also agreed to pay $8.5bn for Taylor Morrison in July.
For us, Berkshire remains a collection of strong businesses combined with an exceptional capital allocation culture. The compounding engine is working just fine — and Berkshire now appears to see more opportunities to deploy its capital.

This communication is for information purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument. Past performance is not indicative of future results.