Berkshire Hathaway repurchased nearly $1 billion of its own stock in the third quarter after the company changed a rule that had restricted stock buybacks.
Berkshire Hathaway (BRKB), Warren Buffett’s industrial and insurance conglomerate, said its net income jumped to $18.5 billion from $4.1 billion a year ago. Most of the gains came from its massive investment portfolio, though the value of its holdings are down slightly.
The company also saw a huge increase of cash on its balance sheet. Available cash soared to $36.5 billion at the end of September from $25.5 billion at the start of the year.
Berkshire also reported a rare stock buyback of $928 million after the board in July removed strict limits that essentially prohibited share repurchases. The last time Berkshire bought its own stock was in December 2012.
Stock buybacks have been one factor helping fuel the market run to record highs in 2018. They also lower a company’s overall share count, which in turn boosts earnings per share.
The move also indicates that Buffett, an investing guru known as the Oracle of Omaha, has not seen many attractive new options at a time of sky-high valuations. Buffett earlier this year said his investment philosophy is to stick with “big, ‘easy’ decisions and eschew activity.”
The company also got a boost from its massive insurance operations and the new US tax code. Its effective tax rate this year has been 19.2%, compared to 27.2% in the first nine months of 2017.
Berkshire Hathaway shares are up more than 4% this year, which is a bit better than the Dow and S&P 500, though shares are 8% below their 52-week high.
The company’s performance is tied to both its many subsidiaries — including Geico, railroad Burlington Northern Santa Fe and consumer brands like Duracell, Dairy Queen and paint maker Benjamin Moore — and its many investments, including Kraft Heinz (KHC) and Apple (APPL).
Some of its investments have been lackluster in recent months, and Berkshire’s continued support for big banks such as scandal-ridden Wells Fargo (WFC), Bank of America (BAC), US Bancorp (USB) and Bank of New York Mellon (BK) have dragged it down too.
Apple remains the most valuable stake Berkshire has in any one company, worth $57.6 billion as of September 30.