Ajit Jain at the Berkshire Hathaway annual meeting in Los Angeles, California. May 1, 2021.
Gerard Molenaar | CNBC
Ajit Jain, insurance executive and CEO of Warren Buffett, sold more than half of his stake Berkshire Hathawayshowed in a new regulatory filing.
The 73-year-old vice chairman of insurance operations on Monday dumped 200 shares of Berkshire Class A stock at an average price of $695,418 per share for about $139 million. As a result, he owned only 61 shares, while family trusts he and his wife set up for the benefit of his descendants own 55 shares and his non-profit organization, the Jain Foundation, owns 50 shares. Monday’s sale represented 55% of his total stake in Berkshire.
The move marked the biggest decline in Jain’s holdings since he joined Berkshire in 1986. It’s unclear what motivated Jain’s sale, but he did benefit from Berkshire’s recent high price. The conglomerate traded above $700,000 and reached a market capitalization of $1 trillion at the end of August.
“This seems to be a signal that Ajit views Berkshire as fully valued,” said David Kass, professor of finance at the University of Maryland’s Robert H. Smith School of Business.
Berkshire Hathaway
It also corresponds with a significant slowdown in Berkshire’s stock buyback activity of late. Omaha, Nebraska-based Berkshire repurchased just $345 million of its own stock in the second quarter, significantly less than the $2 billion repurchased in each of the previous two quarters.
“I think this is, at best, a sign that the stock isn’t cheap,” said Bill Stone, CIO at Glenview Trust Co. and shareholder of Berkshire. “At over 1.6 times book value, this is probably around Buffett’s conservative estimate of intrinsic value. I don’t expect much, if any, share buybacks from Berkshire around these levels.”
Indian-born Jain has played a pivotal role in Berkshire’s unparalleled success. He facilitated a push into the reinsurance industry and more recently led a turnaround at Geico, Berkshire’s crown jewel auto insurance company. In 2018, Jain was named vice chairman of insurance operations and appointed to Berkshire’s board of directors.
“Ajit has created tens of billions of value for Berkshire shareholders,” Buffett wrote in his annual letter in 2017. “If there were ever another Ajit and you could trade me for him, don’t hesitate. Make the transaction!”
Before it was officially announced that Greg Abel, vice chairman of Berkshire’s non-insurance operations, would eventually succeed the 94-year-old Buffett, there were rumors that Jain would one day lead the conglomerate. Buffett recently made it clear that Jain “never wanted to run Bershire” and that there was no competition between the two.