Berkshire has renewed a buyback and its new head has spent a year's salary on shares

Warren Buffett's Berkshire Hathaway has resumed buying back its own shares, something it has not done for almost two years. At the same time, new CEO Greg Abel, who replaced Buffett in this position since January, also bought $15 million worth of the company's securities, an amount equal to his annual salary. What does this move tell investors?

Berkshire Hathaway said in a filing with the regulator that it began repurchasing Class A and Class B shares on Wednesday, March 4, CNBC reports . How long it will last and what volume is planned to be purchased is not specified.

The new head of the investment company Greg Abel, Warren Buffett's successor, told a TV channel interview that he discussed the buyback with his legendary predecessor and assessed the value of the securities before taking this step. Under Berkshire's policy, the CEO can decide to buyback at any time after consulting with Buffett - who remains chairman of the company - if he believes the stock is trading below its intrinsic value.

The last time Berkshire bought back its own securities was in the second quarter of 2024, and some investors have been pushing for the company to somehow use its accumulated giant $373.3 billion in cash reserves, CNBC notes. In each of 2020 and 2021, for example, it bought back more than $24 billion worth of stock, and spent $2.9 billion on the last buyback before the long break.

Abel said the share buyback "makes more sense" than other purchases, noting that Berkshire doesn't usually disclose the start of buybacks, but this time - amid a leadership change - decided to notify shareholders.

In a separate report, Abel said that in addition, he personally purchased $15.3 million worth of Berkshire stock, an amount equal to his annual after-tax income. He also told CNBC that he intends to invest his entire salary in Berkshire stock each year while he remains in office.

Prior to that purchase, the value of Abel's stake in the investment firm was about $164.4 million, according to FactSet data cited by CNBC.

Some market participants have questioned whether Buffett's successor has a comparable "personal financial interest" in the company, the TV station points out. "The Oracle of Omaha" owns about 37.5% of Berkshire's Class A shares. He previously said those securities represent about 99.5% of his wealth.

"The complete alignment of [my] interests with our shareholders, partners and owners is critical," Abel told CNBC. - As CEO, I certainly believe in Berkshire."

Shares of Berkshire class A rose in price on trades on March 5 by 2.7%. At the same time for the period from the beginning of the year to the closing of the session on March 4, they lost 3% of value, notes Marketwatch.

The company's quotes have retreated 10% from the record high reached last May, CNBC calculated. They came under pressure this week after Berkshire reported a nearly 30% drop in fourth-quarter operating profit - mainly due to weak results from its insurance business.

Wall Street treats the company's securities with caution: only two analysts out of seven advise to buy them, according to Marketwatch. Four took a neutral stance, and one advised to sell. The average target price of the class B shares is $530, which means a potential upside of 6% from the close of trading on March 5.

During his six decades as CEO of Berkshire Hathaway, Buffett has provided shareholders with an average annualized return of about 20%, Seeking Alpha writes, citing analysts at Karlsson & Partners.

Abel, who succeeds him, previously led the conglomerate's non-insurance operations. In his first letter to investors, he emphasized that Berkshire will retain Buffett's investment philosophy of financial prudence and disciplined investing, and reiterated that he has no plans to change its capital allocation strategy despite lower profits in 2025.

This article was AI-translated and verified by a human editor