Buffett and his Buybacks
About this project
“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive),” the 92-year-old investor said in the much anticipated letter released Saturday.
(source CNBC)
Buffett has pushed back against critics of buybacks, notably politicians who believe the cash would be better reinvested into the company thus benefiting the overall economy and labor market.
I wanted to analyze how BRK.A stock performed in the year following each buyback period.
I gathered the data from publicly available sources, specifically Yahoo finance. I gathered the amount of buybacks, how the stock performed in the year following the buyback year and the performance of the SP500 for each year. The data was cleaned in google sheets and basic analysis was done. The time frame was 2018 to 2022.
2020 and 2021 were the biggest amounts of buyback Buffett made in BRK stock, buying over 50 billion dollars worth of shares. This may be due to the fact that during the covid pandemic he simply wanted to be conservative with his cash, perceived no better investment opportunities or the fact that the shares were trading at multi year lows.
In the years subsequent to the buy back period, 4 out of 5 had positive returns.
What is interesting is he only outperformed the SP500 for each respective year 2 out of the 5 periods.
However, BRK.A outperformed the SP500 for the cumulative period 56.3% to 45.6%
A large part of this result may be attributed to the face BRK.A gained 4% in 2022 while the SP 500 lost 19.6%
“As Warren Buffett has advised, the first rule of investing is, don't lose money. The second rule is, don't forget rule number one.
It would appear, at least in the time frame studied, that Buffett was a good steward of the stockholders cash, at least compared to investment in a SP500 index fund. His ability to not lose money while many others are, coupled with his long view seemed to have proven him right, at least in the scope of this work.
Full analysis dashboard here: Buybacks | Tableau Public
