One of Buffett's top lieutenant, and Berkshire’s vice chair of insurance operations, Ajit Jain, has sold $139 million worth of his Class A shares - more than half of his holdings - in Warren Buffett’s conglomerate.
Jain disposed of 200 of the Class A Berkshire shares for about $695,418 each, according to a regulatory filing Wednesday. The disposal means the long-term executive is left with control of 166 such shares, 61 of which he directly owns.
The sale was the biggest drop in Jain’s holdings since he joined Berkshire in 1986. As CNBC notes, it’s unclear what motivated Jain’s sales, but he did take advantage of Berkshire’s recent high price. The conglomerate traded above $700,000 to hit a $1 trillion market capitalization at the end of August.
“This appears to be a signal that Ajit views Berkshire as being fully valued,” said David Kass, a finance professor at the University of Maryland’s Robert H. Smith School of Business.
The sale is also consistent with a significant slowdown in Berkshire’s share buyback activity as of late, as well as its record liquidation of stock holdings, most notably Apple and Bank of America. Omaha, Nebraska-based Berkshire repurchased just $345 million worth of its own stock in the second quarter, significantly lower than the $2 billion repurchased in each of the prior two quarters.
“I think at best it is a sign that the stock is not cheap,” said Bill Stone, CIO at Glenview Trust Co. and a Berkshire shareholder. “At over 1.6 times book value, it is probably around Buffett’s conservative estimate of intrinsic value. I don’t expect many, if any, stock repurchases from Berkshire around these levels.”
The India-born Jain joined Berkshire Hathaway in 1986 to work on the conglomerate’s insurance operations, which include car insurer GEICO. He facilitated a push into the reinsurance industry and more recently led a turnaround at Geico, Berkshire’s crown jewel auto insurance business. In 2018, Jain was named vice chairman of insurance operations and appointed to Berkshire’s board of directors.
Buffett has long praised Jain, saying in 2017 that he’s probably made more money for Berkshire than Buffett has: “Ajit has created tens of billions of value for Berkshire shareholders,” Buffett wrote in his annual letter in 2017. “If there were ever to be another Ajit and you could swap me for him, don’t hesitate. Make the trade!”
In 2018, Jain and Greg Abel were named vice chairmen of the firm, with Abel, who’s a decade younger than Jain, eventually being tapped as Buffett’s successor.
Investors have questioned whether Jain, 73, would stick around to help Abel run things once Buffett, now 94, leaves the firm. The answer appears to be no.
