Berkshire Ramps Up Stock Buybacks as Cash Pile Keeps Growing

(Bloomberg) -- Warren Buffett's Berkshire Hathaway Inc., sitting on a cash pile of more than $114 billion, spent the first quarter snapping up more of its own stock.

The Omaha, Nebraska-based conglomerate repurchased $1.7 billion of shares as the stock dipped in the first quarter. That was more than the $1.3 billion that Berkshire, which historically has preferred using its cash on equities or acquisitions, spent all of last year after relaxing its policy on buybacks.

Buffett has been prepping shareholders for the possibility of more stock buybacks, a move he's largely shunned throughout his more than six-decade career. As Berkshire has grown into a $739 billion behemoth, the billionaire investor has found it harder to uncover attractive deals that move the needle for the company.

At the current stock price, "we feel that we're O.K. buying it, but we don't salivate over buying it,” Buffett said at the firm's annual meeting Saturday. “You could easily see periods where we would spend very substantial sums if we thought the stock was selling at say, 25 or 30 percent less than what it was worth, and we didn't have something else that was even better.”

Even with the buybacks, the pile of cash and U.S. Treasury bills climbed 2 percent to $114.2 billion in the first quarter as Berkshire's sprawling network of manufacturing and service companies pump out more profit thanks to a healthy U.S. economy. While too much cash is a high-class issue, it has weighed on Buffett's efforts to outpace the broader markets, with Berkshire shares' total return trailing the S&P 500 over the past decade.

The growing cash pile will likely spur questions about Buffett's outlook for dealmaking at the shareholder meeting. The annual event in Omaha, Nebraska features hours of the billionaire answering investor questions on everything from company strategy and succession to politics and life lessons.

Buffett said in response to the first question at the meeting that the size of the firm's cash pile doesn't change his approach to share buybacks.

“We will buy stock when we think it is selling below a conservative estimate of its intrinsic value,” Buffett said. “Now, the intrinsic value is not a specific point, it's probably a range in my mind that might have a band of 10 percent.”

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Buffett did show this week that he can still find unique opportunities. Berkshire agreed to invest $10 billion in Occidental Petroleum Corp. in a deal that Bank of America Corp.'s Brian Moynihan helped facilitate. The transaction, which hinges on Occidental winning its fight to buy Anadarko Petroleum Corp., would give Berkshire preferred stock and warrants.

Outside of its own shares, Berkshire was a net seller of stocks in the first quarter, with sales and redemptions totaling $2.06 billion compared to purchases of $1.53 billion. The company's stake in Apple Inc. climbed in value to $48.5 billion as the tech giant's shares jumped 20 percent in the quarter.

Operating earnings rose 5 percent in the quarter to $5.56 billion as the company benefited from gains at its railroad BNSF, its energy empire, and the manufacturing and retail businesses. The railroad, which was significantly hit by severe winter weather and flooding, still posted a 9.4 percent climb in earnings partly due to higher rates per car.

While Berkshire's insurance businesses reported better investment results, underwriting income slipped 4.4 percent. That was hurt by net losses in the reinsurance operations that were driven by a rise in estimated liabilities and a slump at Berkshire Hathaway Primary Group.