Buffett Says Berkshire Made $4 Billion of Stock Investments During Quarter

01-10-2011  Bloomberg

Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) added about $4 billion in common stock to its investments during the third quarter, taking advantage of undervalued equities as stock markets slid.

The net change, described by Buffett today in a Bloomberg Television interview, compares with $3.4 billion in the second quarter. That was the most since Omaha, Nebraska-based Berkshire plowed a net $3.6 billion into stocks during the third quarter of 2008, the height of the global credit crisis.

“We’re ready to buy lots of things,” Buffett, 81, said in the interview with Betty Liu on the floor of the New York Stock Exchange. Berkshire’s program to purchase its own stock, announced earlier this week, “won’t keep us from investing billions and billions and billions in plants and equipment, in new acquisitions.”

Berkshire, which had a $67.6 billion equity portfolio as of June 30, is focusing on stocks after its cash hoard swelled and interest ratesremained near record lows. Equities markets around the world fell during the third quarter amid speculation that Europe will fail to contain its sovereign debt crisis and that the U.S. economy will weaken.

Earnings from Berkshire’s businesses have grown to about $1 billion a month, and finding uses for that cash has become more difficult, Buffett said in April. The Standard & Poor’s 500 Index dropped 12 percent from the end of June through yesterday, heading for the worst quarterly performance since the last three months of 2008, while the Stoxx 600 Europe Index tumbled 16 percent.

Buying When ‘Cheap’

Buffett, the company’s chairman and chief executive officer, excluded the firm’s $5 billion purchase of Bank of America Corp. (BAC)’s preferred stock from his $4 billion estimate for common-stock investments. The deal with the Charlotte, North Carolina-based lender pays $300 million in annual dividends and gave Berkshire warrants to purchase 700 million shares of common stock for $7.14 each.

Berkshire, which has shunned buybacks for four decades, said Sept. 26 that it will repurchase shares for as much as 110 percent of their book value because the stock is undervalued. The firm has since started procuring them.

Its Class A shares had slipped below $100,000 in New York Stock Exchange composite trading on Sept. 22 for the first time since January 2009. They traded at $108,400 as of 11:43 a.m. today.

“If the stock is cheap, we will buy it,” Buffett said. “If it isn’t cheap, we won’t buy it.”