Berkshire Hathaway (BRK.A) (BRK.B) is once again doing what it historically only does when management believes the opportunity is compelling: buying back its own stock. After a long hiatus in repurchases, even as its cash pile grew to record levels, it resumed buying back shares under new CEO Greg Abel. On the surface, this may seem like a normal investment allocation move. In fact, it has a much deeper message for investors.
For decades, Berkshire’s purchasing policy has been sound and disciplined. The company buys back shares only when they are trading below a conservative estimate of intrinsic value. Unlike most corporations that use buybacks mechanically or opportunistically to manage earnings per share, Berkshire treats them as an investment decision, competing directly with acquisitions, public equity investments, and cash. This makes any resume especially meaningful.
So what should investors take away from this move? Let’s break down what the resumption of buybacks actually signals, how it fits into Berkshire’s disciplined capital allocation framework, and why this development may be more important than the start.
Berkshire Hathaway, based in Omaha, Nebraska, is a diversified company. It operates under a decentralized management structure, giving its many subsidiaries considerable autonomy in their operations. Berkshire’s insurance division includes property, casualty, life, accident, and health insurance, as well as reinsurance services. Its freight rail transportation business is operated through BNSF Railroad, the largest railroad network in North America. In the utility segment, Berkshire Hathaway Energy generates and delivers electricity from a range of sources, including natural gas, coal, wind, and solar. Berkshire is also involved in manufacturing, services, and retail businesses. It has a market cap of $1.08 trillion.
Shares of the company are down 1.7% on a year-to-date (YTD) basis. The latest leg of the stock came last week after the company posted a nearly 30% drop in Q4 operating income, driven largely by weakness in its insurance business. However, news of a resumption of buying helped the stock recover most of those losses.
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Berkshire Hathaway began buying back its shares (Class A and Class B) last Wednesday. The move marks former CEO Warren Buffett’s reluctance to buy back shares in recent quarters. Notably, the company did not buy any shares in the fourth quarter, extending a hiatus that began in May 2024. Some investors were a little disappointed by the lack of stock purchases, especially given the company’s significant cash pile, so the relaunch came as a welcome boost.
Under Berkshire’s long-term buyback policy, the company buys back shares when it believes they are trading at a discount to the stock’s intrinsic value, conservatively determined. Berkshire’s policy does not require the company to buy back any specific number of shares. Shares may be purchased on the open market or privately negotiated, with the timing and amount of purchases determined by stock prices, market conditions, and other relevant factors.
Berkshire Hathaway CEO Greg Abel said CNBCHe consulted with former CEO Warren Buffett before deciding to resume share buybacks. “So how I approached it was, obviously, looking at value, having an intrinsic value perspective (and then) consulting with Warren about value and timing,” Abel said. Abel also said the company chose to disclose repurchases because of its recent leadership change, but going forward, it will not announce when it repurchases shares on the market. Meanwhile, the company said in a filing that the purchase may be suspended or discontinued at any time without prior notice and that it is under no obligation to update or revise any disclosure.
CEO Greg Abel also personally purchased nearly $15 million in company stock, an amount equal to his after-tax annual salary, according to an SEC filing. Abel said CNBC He plans to use his entire annual salary to buy back Berkshire shares every year for as long as he leads the company, which he said he expects to be “20 years.” With this, Abel’s purchases could reach hundreds of millions of dollars during this period. Abel said the goal is to show “absolute alignment with our shareholders,” adding that he has strong confidence in Berkshire’s future opportunities. “Our shareholders, our owners, are using their after-tax dollars to buy Berkshire. I will do the same.”
The resumption of buybacks is a positive signal for Berkshire Hathaway, as it suggests the company views its shares as undervalued. However, this move is a less bullish signal for the broader market. Let me explain this in more detail.
When Berkshire buys back its shares, it usually indicates that management doesn’t see more attractive investment opportunities elsewhere in the market for the cash. In other words, it represents a commitment to deploy cash to create shareholder value when “elephant-sized” acquisitions or equity investments are not available. The move also suggests that new CEO Greg Abel is continuing the philosophy of disciplined capital allocation pioneered by Buffett—repurchasing shares when they are undervalued rather than overpaying for acquisitions. Notably, Berkshire has made only a few gains and has been a net seller of other stocks in recent years. Specifically, Berkshire was a net seller of the stock for the third consecutive year in 2025.
Overall, it appears that Berkshire remains cautious about the broader market, which is likely to push valuations higher. Its $373 billion in cash and equivalents at the end of 2025 indicates a cautious stance towards the market. Notably, Berkshire had $321 billion in Treasury bills at year-end 2025, making it one of the world’s largest holders. With that, if a market downturn occurs or an attractive value opportunity emerges, Berkshire is well-positioned to deploy that large cash pile.
Wall Street analysts have a “moderate buy” rating on Berkshire’s Class B shares. Of the six analysts covering the stock, two give it a “strong buy” rating, while the other four recommend a hold. The average price target for BRK.B stock is $530.75, indicating a potential downside of 6.4% from Friday’s close.
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As of the date of publication, Oleksandr Pilipenko had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
