REUTERS/Rick Wilking
- Warren Buffett donated $4.1 billion of Berkshire Hathaway stock to charity this week.
- The investor's stake in Berkshire has still grown from 15.5% to 15.8% over the past year.
- Berkshire has ramped up share buybacks, increasing Buffett's ownership of his company.
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Warren Buffett gifted $4.1 billion of Berkshire Hathaway stock to good causes on Wednesday, yet he owns more of his company today than he did a year ago. Stock buybacks explain that disconnect.
The famed investor's stake in Berkshire has grown from 15.5% last July to 15.8% today, thanks to the conglomerate ramping up share repurchases. It plowed around $18 billion into buybacks in the second half of 2020, $6.6 billion in the first quarter of this year, and an estimated $6.5 billion of repurchases this quarter so far. It has spent about $38 billion in total on repurchases since the start of last year.
The latest $6.5 billion outlay is based on Buffett's disclosed Berkshire stake in a regulatory filing this week. We calculated the approximate number of outstanding shares using that information, and subtracted that figure from the share count at the end of March. We then multiplied the decline in shares by Berkshire's average share price over the past 12 weeks to estimate how much the buybacks cost.
It appears that Berkshire has reduced its outstanding shares by about 5% over the past year, while Buffett parted with around 4% of his Berkshire stock to make his latest charitable contribution. As a result, he now owns more of the company, despite holding fewer shares.
Buffett has celebrated the ability of buybacks to passively increase ownership in the past. "I love the idea of having our 5%, or whatever it may be, grow to 6% or 7% without us laying out a dime," he said about Apple's share repurchases at Berkshire's annual meeting in 2018.
The investor highlighted in his latest annual letter that Berkshire's Apple stake has grown from 5.2% to 5.4% since it established a position in mid-2018, even though Buffett and his team sold about 6% of their holding for $11 billion last year. Moreover, he pointed out that Berkshire's own share repurchases have boosted its shareholders' indirect ownership of Apple, the biggest position in Berkshire's stock portfolio by far.
"The math of repurchases grinds away slowly, but can be powerful over time," Buffett said in the letter. "The process offers a simple way for investors to own an ever-expanding portion of exceptional businesses."
Buffett's rising ownership of Berkshire despite his latest act of philanthropy is a great example of that process in action.