Berkshire Hathaway Stock Jumps After Buyback Rules Eased

OMAHA, Neb. (AP) — Berkshire Hathaway's stock price jumped more than 5 percent Wednesday after it eased restrictions on buying back its own shares.

The Omaha, Nebraska, conglomerate led by Warren Buffett said that after it posts earnings on Aug. 3, it will begin allowing Buffett to buy stock at prices up to what the company determines is the shares' intrinsic value.

Since 2012, Berkshire has restricted buybacks to prices below 120 percent of the stock's book value, which is an estimate of the company's value after liabilities are subtracted from assets.

The rule change increases the odds the company's cash pile — Berkshire has accumulated more than $100 billion while Buffett looks for another acquisition or investment — will be directed at buybacks.

But it will not do so if it reduces its cash below $20 billion.

Edward Jones analyst Jim Shanahan said the new buyback rules suggest Buffett believes Berkshire's stock is attractive around current values.

"It also speaks to the amount of cash they have, and the lack of attractive opportunities in the market," Shanahan said.

Buffett has long said that he thinks investors will benefit more by him reinvesting Berkshire's cash instead of paying a dividend. But this move suggests stock repurchases may become more common.

Berkshire spent $1.2 billion in 2012 to repurchase 9,200 Class A shares from the estate of a longtime shareholder and another $67 million on repurchases in 2011 after Buffett first authorized repurchases. But it hasn't made any sizeable repurchases since then.

Berkshire owns more than 90 companies, including railroad, clothing, furniture and jewelry firms. Its insurance and utility businesses typically account for more than half of the company's net income. The company also has major investments in such companies as American Express, IBM and Wells Fargo & Co.