Buffett shows appetite for buying stocks

The world’s most famous stock-picker showed a growing appetite for equities in the third quarter -- including a rare move to buy his own firm’s shares. Now, October’s market slide opens the door for Warren Buffett to finally make a dent in his giant pile of cash.

Berkshire Hathaway Inc.’s chairman poured more money into stock purchases last quarter than he has in more than four years. Buffett also spent $928 million on share buybacks during a few weeks in August, a move he’s typically spurned. While the repurchases amounted to less than 1 percent of the company’s cash, they set a new precedent.

Buffett, 88, has been facing a conundrum. He’s long preferred to use Berkshire’s cash to hunt for large deals or snap up stocks in companies such as Apple Inc. and Coca-Cola Co. While it’s still a goal to have “one or more huge acquisitions,” he’s bemoaned that prices for many businesses have reached “all-time highs.” That’s left him struggling to put to work a cash pile that’s topped $100 billion in the past five quarters.

Too much cash is a high-class problem, and one made possible by well-performing operations across the conglomerate’s swath of energy, railroad and retail businesses. A rebound in the company’s insurance unit led to operating profit doubling to $6.88 billion in the third quarter.

But sitting on such a large stack of cash has led to pressure from investors to use it or give it back to shareholders through buybacks and dividends.

Now, the worst month for U.S. stocks in seven years has made several of his favorite companies significantly cheaper. Shares of Apple Inc., Berkshire’s top holding, have dropped 8.1 percent since the end of September, while Bank of America Corp. has slumped 5.3 percent in that time period.

Despite prices that have thwarted any major deals, Buffett has found stocks he likes. He purchased $12.6 billion of equity securities on a net basis during the third quarter, the most in more than four years. A regulatory filing indicated Berkshire added billions to its stake in Bank of America in the third quarter, continuing a trend from the second quarter of adding to positions in financial stocks.

Source: Bloomberg Finance L.P.

Charts: Used with permission of Bloomberg Finance L.P.

Photo: Warren Buffet's Twitter.

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