Warren Buffett bought $9.2 billion of this stock last year, but suddenly he’s not interested anymore

Much has been made of Warren Buffett’s recent decisions to sell parts of Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) major equity holdings. The Oracle of Omaha has made its largest stock sale in Berkshire Hathaway history when he reduced the company’s stake in Apple in two in the last quarter. More recently, it sold billions of dollars of Bank of America action.

Both moves represent major changes for Buffett that investors shouldn’t ignore. But while Buffett has been a net seller of stocks for seven straight quarters, he has consistently bought one stock in particular with proceeds from sales and cash generated from Berkshire’s core businesses.

The $9.2 billion he spent last year buying shares made it his largest stock purchase for the company of any of his investment options. He continued to buy the stock in the first quarter, adding $2.6 billion in purchases. But last quarter, Buffett spent just $356 million buying the stock and avoided it altogether in June.

The sudden lack of appetite should worry Berkshire Hathaway investors, because the stock Buffett consistently bought until last quarter was Berkshire Hathaway stock itself.

Buffett’s Favorite Stock to Buy

Buffett has been buying Berkshire Hathaway stock since the 1960s. He first did so as a portfolio manager for Buffett Partnership Ltd., when Berkshire Hathaway was a struggling textile company. He bought a majority stake in 1965 and quickly became CEO. It was 46 years before he bought shares as CEO, when Berkshire Hathaway instituted its first stock repurchase program in 2011.

After a long drought of stock buybacks due to restrictive language in the repurchase authorization, Berkshire’s board changed things in mid-2018. The new repurchase authorization allows Buffett to buy back Berkshire Hathaway shares whenever he determines the stock price is below its closing price. intrinsic valuejudged on a conservative basis. The only other condition is that the company must maintain $30 billion in cash or Treasury bills.

Since the change in authority, Buffett has repurchased shares every quarter. But the $356 million in repurchases in the most recent quarter was the lowest amount he has spent so far.

And it’s not for lack of cash. Berkshire ended the quarter with a record $277 billion in cash and Treasuries. Net operating cash flow for the first half of the year was $24.2 billion (though management warns that number will decline now that it owes a massive tax bill on all its stock sales).

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The simplest explanation is that Buffett didn’t think Berkshire Hathaway’s stock was good value in the second quarter.

Buffett’s Buyout Philosophy

Buffett sees stock buybacks as the best way to return money to shareholders.

Dividends are a commitment on the part of a company. Unless there is a significant change in the company’s prospects, it will pay shareholders a fixed amount each year (or often more frequently). And typically, this amount…