Analysts are bearish on Berkshire stock, should you be too?

Berkshire Hathaway stock outperformed the S&P 500 in 2022. The stock is in the green while most major companies are in the red. The conglomerate led by Buffett also outperformed the markets last year.

However, the stock has performed poorly in 2019 and 2020. After the recent outperformance, Wall Street analysts don't seem too bullish on Berkshire Hathaway stock. Should you buy or sell the stock now?

Warren Buffett sold stocks last year
Berkshire Hathaway was a net seller of stocks in all four quarters of last year. The conglomerate was also a net seller of stocks in the fourth quarter of 2020. Since 2020, Berkshire has only been a net buyer of stocks in first quarter of 2020, when the conglomerate's net stock purchases reached a paltry $1.7 billion, and in the third quarter of 2020, when the company purchased $4.9 billion worth of stock. During this quarter, Buffett took stakes in Japanese trading companies. Most of Berkshire's investments are solely in the United States, but the conglomerate also invests in international markets.

For example, the conglomerate invested in Chinese company BYD, Indian fintech startup Paytm and Brazilian neobank NU Holdings. Buffett surprised the markets when the company sold $12.9 billion worth of stock in the second quarter of 2020. That quarter, Buffett sold all the airlines that Berkshire owned.

Berkshire instead repurchased shares.
Berkshire has spent billions of dollars on stock buybacks. It repurchased $7 billion worth of stock in the last quarter of 2021. While that amount is less than the $7.5 billion it repurchased in the third quarter, it still brings 2021 repurchases to $26 billion.

This is a new record for the conglomerate, ahead of $24.5 billion in 2020. Notably, Berkshire changed its buyout policy in 2018 to give Buffett more discretionary power. Previously, the company only bought back shares if they traded below 120% of its book value. Buffett places a lot of importance on the company's book value, which has grown significantly over the years.

Warren Buffett is back in the game
For nearly two years, Berkshire's cash position has hovered around $149 billion. While the company spends generously on stock buybacks, it also generates plenty of free cash and receives billions of dollars in dividends each year from the companies it invests in. Buffett laments the lack of buying opportunities.

In its annual letter this year, the Oracle of Omaha said: “Today, however, we find little that excites us - long-term interest rates that are low push up the prices of all productive investments, whether it's stocks, apartments, farms, oil wells, whatever."

Buffett made significant investments in 2022
However, Berkshire is now back to dealmaking, an activity that Buffett is historically known for. In 2022, the company invested $23 billion. Most of that money went toward the acquisition of Alleghany, which would be the company's biggest acquisition since Precision Castparts, which Buffett acquired for $36 billion.

Berkshire has invested more than $6.5 billion in Occidental Petroleum. The company also announced a $4.1 billion investment in HP. The investment in HP particularly surprised markets as Buffett has generally steered clear of tech companies, even though Apple is the conglomerate's largest holding.

Rate hike positive for Berkshire
Over the past few years, Buffett has been missing out on business. Low interest rates and the availability of cheap money allowed private equity firms to outbid Berkshire. Today, with rising US interest rates, the days of cheap money seem to be over. Additionally, with the uncertainty surrounding the pandemic having dissipated, Buffett seems comfortable with big deals.

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