Berkshire Hathaway's Vice Chairman of Insurance Business, Ajit Jain, sold $0.139 billion worth of Berkshire Hathaway Class A stocks, marking his biggest sell-off since joining Berkshire Hathaway in 1986. Ajit's sell-off comes at a time when Berkshire Hathaway's recent share buyback activities have significantly slowed down and there has been a large-scale sell-off of its holdings in Apple and Bank of America.
According to Thursday's news, Ajit Jain, Vice Chairman of Berkshire Hathaway's insurance business, sold shares worth 0.139 billion US dollars, with a shareholding reduction of more than half. $Berkshire Hathaway-A (BRK.A.US)$
According to regulatory documents, Ajit Jain sold 200 shares of Berkshire Class A stock at a price of approximately $695,418 per share. This sale means that he still holds a total of 166 shares of Berkshire Class A stock, of which he personally owns 61 shares.
Ajit will celebrate his 73rd birthday on September 15th. He is Warren Buffett's right-hand man and one of his main deputies. Ajit joined Berkshire in 1986 and is responsible for the company's insurance business, including auto insurance company GEICO. In 2018, Ajit was appointed Vice Chairman of the insurance company.
Buffett has long praised Ajit. For example, in 2017, Buffett said that Ajit may make more money for Berkshire than he does. Buffett even said, 'If there was another Ajit, you could have me for him without hesitation. Make the trade!'
In 2021, Buffett publicly stated that the directors unanimously agreed that if he stepped down, Greg Abel, Vice Chairman of Berkshire's non-insurance business, would succeed him as CEO. Greg, who is ten years younger than Ajit, was ultimately chosen as Buffett's successor. Age was a key factor in Berkshire's final decision.
Investors question whether Ajit will stay to help Greg manage the company once Warren Buffett, who is now 94 years old, leaves the company. Financial blog Zerohedge commented that the answer seems to be negative.
Ajit's massive sell-off is also his largest since joining Berkshire Hathaway in 1986. It is still unclear what motivated Ajit to sell such a large amount of stocks, but he did take advantage of Berkshire Hathaway's recent high stock prices.
In late August of this year, Berkshire Hathaway's market cap surpassed $1 trillion for the first time, making it the first non-technology company in the US to join the "trillion-dollar club". Berkshire Hathaway Class A shares reached $0.727 million in early September, and Ajit's selling price is not far from its all-time high.
Some analysts believe that this seems to indicate that Ajit believes Berkshire Hathaway's valuation has been fully realized. This at least indicates that the stock price is not cheap. Currently, Berkshire Hathaway's PB ratio is greater than 1.6, which is close to Warren Buffett's conservative estimate of intrinsic value. It is expected that Berkshire Hathaway will not buy back a lot of stocks, if any.
When contacted by the media, Ajit refused to comment. Berkshire Hathaway also did not immediately respond to requests for comment.
Ajit's sell-off comes at a time when Berkshire Hathaway's recent share buybacks have slowed significantly, and when there has been a large-scale sell-off of its holdings in Apple and Bank of America:
In the second quarter of this year, Berkshire Hathaway only repurchased $0.345 billion worth of its own stock, well below the $2 billion per quarter buyback scale of the previous two quarters.
Berkshire Hathaway's second quarter financial report, released in early August, showed that its holding of Apple stocks in the second quarter decreased from 0.789 billion shares in the first quarter to about 0.4 billion shares, a decrease of nearly 50%. This news once triggered a stock market crash.
Berkshire Hathaway continues to sell its holdings in Bank of America, marking the first reduction in its long-term "favorite stock" since the third quarter of 2020. Bank of America has dropped from Berkshire Hathaway's second largest position to the third largest.
In the second quarter of this year, Berkshire Hathaway raised its cash level to a record $189 billion.
The market generally believes that Berkshire Hathaway's recent actions seem to be a defensive move, preparing for a larger pullback in the US stock market. Historically, the S&P 500 index has experienced a pullback of more than 20% about every 18 months. These healthy pullbacks provide an opportunity for market valuations to reset from overbought levels, which is also the reason investors start buying stocks again.
On Thursday, the US stock market continued its recent rally, with the S&P 500 index rising for the fourth consecutive trading day. However, Berkshire Hathaway's stock price has fallen against the trend this week, underperforming the overall US stock market in recent trading days.
Editor/Somer