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Buffett increased his stake in the first half of this year by buying Alphabet for about US$350. However, the company’s poor financial results led to a sharp decline in the share price, which could put this last major investment in short-term trouble.
Google Parent company Alphabet reported disappointing financial results on the 28th, and its stock price fell sharply after the market closed. This could lead to “Stock God”buffet resignberkshire The last big investment made by the chairman went bust.
Barron’s reported that in accordance with Alphabet’s US$85 billion equity financing plan announced in early June, Berkshire participated in the investment and increased its stake in Alphabet by US$10 billion in the first half of the year, at a price of about US$350 per share.
However, Alphabet’s third-quarter financial report announced on the 28th disappointed investors. Earnings per share were only US$2.12, down from US$2.87 in the same period last year and about US$3 less than market expectations. As a result, its share price fell more than 10% to US$291 after the market closed.
Alphabet said it had $9 billion of negative free cash flow due to artificial intelligence (AI)-related capital expenditures.
In an exclusive interview with CNBC in July this year, Buffett had said that it was his decision to increase his stake in Alphabet shares. Buffett stepped down as CEO of Berkshire Hathaway at the end of last year, but still serves as chairman. Until recently, he had also resigned as chairman and planned to hand over the reins to his son Howard.
Although it is impossible to confirm the average price at which Buffett purchased Alphabet shares, it is likely to be more than $300 or closer to $320 per share.
Berkshire bought 18 million shares of Alphabet in the third quarter of last year at an average price of about US$225 per share. In the first quarter of this year, its stake increased to nearly 40 million shares at an average price of about US$315. In the second quarter, it increased its stake to about 50 million shares, including about 30 million shares purchased at a price of about US$350. As of the end of June, Berkshire owned a total of 106 million Alphabet shares, including shares with and without voting rights.
Based on after-hours stock prices, Berkshire Hathaway’s holdings are currently valued at about $30 billion, down from a high of $37 billion in June. Alphabet is Berkshire’s fourth-largest holding after Apple, American Express and Coca-Cola.
Berkshire used to provide costs for its top 15 holdings, but stopped doing so in early 2020. This makes it more difficult for outsiders to calculate profits and losses from their new investments and hold them accountable for their investments.
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The report reported that after Berkshire participated in Alphabet’s financing in the first half of this year, it increased its stake in Alphabet to about US$350 per share. It is estimated that Buffett’s average purchase cost may exceed US$300 or even close to US$320.
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Alphabet’s earnings per share in the third quarter were only US$2.12, down from US$2.87 in the same period last year and nearly US$3 below market estimates. With AI capital expenditure under pressure, free cash flow turned negative by US$9 billion, and the stock price fell more than 10% after the market closed.
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As of the end of June, Berkshire held a total of 106 million shares of Alphabet, valued at about US$30 billion, down from a peak of US$37 billion in June; Alphabet was Berkshire’s fourth-largest holding.
