When Warren Buffett talks, Wall Street listens — and the “Oracle of Omaha” issued a blanket defense of stock buying in his latest annual letter to Berkshire Hathaway shareholders. That’s why we shine a light on the Club holdings that repurchase the most stock, including Morgan Stanley (MS), Meta Platforms (META) and Apple (AAPL). Buffett’s argument, which mirrors the Club’s thinking, is simple: “When the number of shares goes down, your interest in our many businesses goes up. released on February 25, along with Berkshire’s fourth quarter earnings report. In other words, buybacks allow investors to own a larger percentage of a company’s earnings without needing to spend more money on additional shares. Not all buybacks are created equal, as Buffett rightly pointed out in his anticipated annual letter. They can be made at reckless times, such as when a company’s stock price is overvalued. However, in general, buybacks are a beneficial tool at management facilities. “When you are told that every buyback is harmful to shareholders or the country, or especially beneficial to CEOs, you are listening to an economic illiterate or a demagogue with a silver tongue (characters who are not mutually exclusive),” wrote Buffett, Chairman and CEO of Berkshire Hathaway. Buffett has headed Berkshire, a multinational holding company whose subsidiaries span most of ‘ the US economy, since 1965. He is one of the most successful and richest investors in the world, with a net worth of over $100 billion. For over a year, the Club’s investment mantra has emphasized companies that return money to shareholders through buybacks and dividends. “It’s very helpful to know that’s what Buffett is focused on, so we’re actually going to put our portfolio through Buffett’s test,” said Jim Cramer ir “Homestretch,” our daily afternoon audio feature to prepare members for the final hour of trading. He said: “We like to test ourselves in every way.” So here’s a full breakdown of buyback activity for the 35 companies in the Jim Cramer Charitable Trust in one big, configurable chart. study. Context Here’s some more color on the buyback activity of seven of Club’s top holdings. Devon Energy (DVN): The oil-and-gas producer slowed its pace of buybacks in the second half of 2022 after buying Validus Energy for about $1.8 billion. Devon bought back just $183 million of stock in the third and fourth quarters combined, compared to $535 million in the first six months of 2022. However, management has said that the company plans to become “active buyers” of its stock in 2023. Coterra Energy (CTRA): Buybacks are expected to be a bigger focus for the company this year. After more than $1.2 billion spent on purchases stock in 2022, Coterra’s board approved a $2 billion buyback last week. The company’s capital return priorities also emphasize buying over its variable share, CEO Tom Jorden said on Coterra’s earnings call Thursday. Costco: In January, the wholesaler’s board reauthorized a $4 billion stock repurchase program, which is set to expire in four years. However, we do not expect them to aggressively buy back stock as history suggests that they prefer to use excess cash to issue special dividends. Wells Fargo (WFC): After buying back about $6 billion of shares in the first quarter of 2022, the bank stopped buying back in the last nine months of the year. However, management said on the company’s fourth quarter earnings call that they plan to resume buybacks this quarter. Starbucks (SBUX): The coffee chain recently resumed its buyback activity, after a roughly two-quarter hiatus after Howard Schultz took over as interim CEO last spring. Instead Schultz increased the company’s investment in its stores and employees. Repurchases in Starbucks first fiscal quarter 2023 totaled $191.4 million. The company has said it plans to return $20 billion to shareholders by the end of fiscal 2025 through dividends and buybacks. Haliburton (HAL): The oilfield services giant began repurchasing shares in the fourth quarter of 2022, buying up $250 million worth of stock. This was the company’s first major buyback activity since the first quarter of 2020, following a multi-year commitment to reduce debt levels. Haliburton also recently committed to a framework that will see it return at least 50% of free cash flow to shareholders through dividends and buybacks. Salesforce: The enterprise software maker’s first buyback program began in the quarter ended Oct. 31, when the company bought back $1.7 billion worth of stock to reduce impairment. It’s part of a $10 billion buyback authorization that Salesforce’s board issued last August. Below is Buffett’s purchase statement hitting the nail on the head. As the chart makes clear, most Club holdings are involved in some level of stock buyback, which is good news for shareholders. We are big supporters of smart buybacks, allowing us to have a larger share of our companies’ earnings than we would without buyback activity. (See here for a complete list of the stocks in the Jim Cramer Charitable Trust.) As a subscriber to the CNBC Investment Club with Jim Cramer, you will receive a trade alert before Jim trades. Jim waits 45 minutes after submitting a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim has discussed a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE HOUSE CLUB INFORMATION CONTAINS OUR TERMS AND CONDITIONS AND OUR PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. THERE IS, OR IS CREATED, NO OBLIGATION OR OBLIGATION WHATSOEVER AS A RESULT OF ANY INFORMATION SUBMITTED TO THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR SPECIFICATIONS ARE GUARANTEED.
The Meta Platforms logo is seen in Davos, Switzerland, May 22, 2022.
High Wiegmann | Reuters
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