This Dirt-Cheap Stock Is Benefiting from Two Layers of Buybacks
Some criticized Warren Buffett for not making many stock purchases during the COVID-19-affected downturn of 2020, but one stock Buffett did buy hand-over-fist last year was Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) itself. Buffett appeared to like his existing portfolio very much, and Berkshire's value declined last year, so why not invest in that portfolio at a discount?
What made Buffett's buybacks especially appealing is that the portfolio companies within Berkshire were themselves buying back stock too. In fact, Buffett devoted lots of real estate in his 2020 annual letter to highlighting this phenomenon, specifically regarding Apple:
When we finished our purchases in mid-2018, Berkshire's general account owned 5.2% of Apple. Our cost for that stake was $36 billion. Since then, we have both enjoyed regular dividends, averaging about $775 million annually, and have also -- in 2020 -- pocketed an additional $11 billion by selling a small portion of our position. Despite that sale -- voilà! – Berkshire now owns 5.4% of Apple. That increase was costless to us, coming about because Apple has continuously repurchased its shares, thereby substantially shrinking the number it now has outstanding... But that's far from all of the good news. Because we also repurchased Berkshire shares during the 2 1/2 years, you now indirectly own a full 10% more of Apple's assets and future earnings than you did in July 2018.
Source Fool.com
