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Buffett's Share Secret: Less is More!
30 Oct
Summary
- Berkshire's Amex share count stayed flat for eight years.
- Ownership stake grew due to company share buybacks.
- Owners benefit when earnings rise and shares decrease.
For eight years, Berkshire Hathaway maintained a consistent number of shares in American Express. However, its percentage ownership in the company saw a notable increase, rising from 12.6% to 17.9%.
This expansion of ownership was not due to additional share purchases by Berkshire. Instead, it was a direct result of American Express actively repurchasing its own shares from the market. As the total number of outstanding shares diminished, Berkshire's fixed share count represented a larger portion of the company.
Warren Buffett distilled this observation into a core investment principle. He posits that when a company experiences an increase in its earnings coupled with a reduction in its outstanding shares, its existing owners generally experience positive outcomes over time.
