Berkshire Hathaway (BRK.A) (BRK.B) is again doing what it historically only does when management believes the opportunity is compelling: buying back its own shares. After a prolonged pause in buybacks, even as its cash reserve rose to record levels, the conglomerate resumed share buybacks under new CEO Greg Abel. At first glance, this might seem like a routine capital allocation measure. It actually conveys a much deeper message to investors.
For decades, Berkshire’s buyback policy has been simple and disciplined. The company buys back shares only when they trade below a conservatively determined estimate of intrinsic value. Unlike many 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 holdings. That makes any resumption of buybacks especially significant.
So what should investors take away from this move? Let’s take a look at what the resumption of buybacks actually indicates, how it fits into Berkshire’s disciplined capital allocation framework, and why this development may be more important than it initially appears.
Berkshire Hathaway, headquartered in Omaha, Nebraska, is a diversified holding company. It operates under a decentralized management structure, giving its numerous subsidiaries considerable autonomy in their operations. Berkshire’s insurance division includes property, casualty, life, accident and health insurance, as well as reinsurance services. Its rail freight business is managed through BNSF Railway, one of the largest rail networks in North America. In the utilities segment, Berkshire Hathaway Energy produces and supplies electricity from a variety of sources, including natural gas, coal, wind and solar energy. Berkshire is also engaged in manufacturing, service and retail businesses. It has a market capitalization of $1.08 trillion.
Shares of the conglomerate have fallen 1.7% year to date (YTD). The stock’s latest decline came last week after the company posted a nearly 30% drop in fourth-quarter operating profit, driven largely by weakness in its insurance business. However, news of the buyback resumption helped the stock recoup most of those losses.
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Berkshire Hathaway began buying back its own shares (Class A and Class B) last Wednesday. The move marked a departure from former CEO Warren Buffett’s reluctance to buy back shares in recent quarters. Notably, the company did not repurchase shares in the fourth quarter, extending a pause that began in May 2024. Some investors had been slightly frustrated by the lack of share buybacks, especially given the company’s significant cash pile, so the resumption was a welcome relief.
Under Berkshire’s long-standing buyback policy, the company buys back shares when it believes they are trading at a discount to the shares’ conservatively determined intrinsic value. Berkshire’s policy does not require the company to buy back a specific number of shares. Shares can be repurchased on the open market or through privately negotiated transactions, and the timing and size of repurchases are determined by share prices, market conditions and other relevant factors.
Greg Abel, CEO of Berkshire Hathaway, said CNBCthat he consulted former CEO Warren Buffett before deciding to resume share buybacks. “So the way I approached it was obviously to look at the value, have a view of the intrinsic value (and then) consult with Warren regarding the value and the timing,” Abel said. Abel also said that the company decided to disclose the resumption of buybacks due to its recent change in leadership, but in the future it will not announce when it will buy back shares in the market. Meanwhile, the company stated in a statement that buybacks may be suspended or discontinued at any time without notice and that it undertakes no obligation to update or revise any disclosures.
CEO Greg Abel also personally purchased nearly $15 million in company stock, an amount equal to his annual after-tax salary, according to an SEC filing. Abel said CNBC He plans to use his entire annual salary to buy Berkshire stock each year as long as he runs the company, which he said he hopes will be “20 years.” With that, Abel’s purchases could total hundreds of millions of dollars over that time period. Abel said the goal is to show “absolute alignment with our shareholders” and added that he has great confidence in Berkshire’s future opportunities. “Our shareholders, our owners, use their after-tax money to buy Berkshire. I will do the same.”
The resumption of buybacks is a positive sign for Berkshire Hathaway, as it suggests that the company considers its shares to be undervalued. However, the move is a less bullish signal for the broader market. Let me explain this to you in more detail.
When Berkshire buys back its own shares, it typically signals that management doesn’t see more attractive investment opportunities for its cash elsewhere in the market. In other words, it demonstrates a commitment to using cash to create shareholder value when there are no acquisitions or elephant-sized capital investments. The move also suggests that new CEO Greg Abel is sticking to the disciplined capital allocation philosophy set by Buffett: buying back shares when they are undervalued rather than overpaying for acquisitions. Notably, Berkshire has made only a handful of acquisitions and has been a net seller of other stocks in recent years. More precisely, Berkshire was a net seller of shares for the third consecutive year in 2025.
All in all, it appears Berkshire remains cautious about the broader market, possibly viewing valuations as elevated. Its $373 billion in cash and equivalents at the end of 2025 underscore a cautious stance toward the market. Notably, Berkshire held $321 billion in Treasury bills at the end of 2025, making it one of the largest holders globally. With that, if a market slowdown occurs or an attractive value opportunity arises, Berkshire is well positioned to deploy its massive cash reserve.
Wall Street analysts have a consensus rating of “Moderate Buy” on Berkshire’s Class B shares. Of the six analysts covering the stock, two rate it a “Strong Buy,” while the other four recommend a Hold. The average price target for BRK.B stock stands at $530.75, indicating a modest upside potential of 6.4% from Friday’s closing price.
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At the time of this publication, Oleksandr Pylypenko had no (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
