Author Topic: Buffett buybacks: Could Berkshire tender stock?  (Read 81758 times)

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #420 on: May 05, 2019, 05:56:19 AM »
With the annual meeting and associated interviews coming up, it would be extremely disappointing if someone didn't ask the obvious question of how exactly substantial repurchases of stock could be achieved in a reasonable timeframe and by exactly what means. WB is of course unlikely to answer directly, but the fact that no one has questioned him on the logistics of it yet is underwhelming to say the least.
So, the gist of the answers on the buyback questions thus far has been: the stock is/has been moderately undervalued, so we have bought some but we would buy way more if it was cheaper. Exactly how they would achieve those significantly more aggressive repurchases is still a big question mark, though.

Charlie seemed to express a more relaxed attitude towards repurchasing more at higher valuations, although that might be an overinterpretation from me.

I would hope that a tender question comes through, but we may have reached the fill on the buyback topic from the journos at this point, and I'm not putting my hopes on the audience for that.

After sleeping on observing the whole Berkshire AGM thing yesterday, I think this is a precise description of the issue at hand. Depending on how the markets evolve going forward, my overall perception is, that Berkshire will likely be a company sitting on a cash pile north of USD 100 B for a prolonged period going forward while growing at a certain clip its businesses - also depending on how in particular the US economy & the global economy in general evolves going forward.

Unfortunately, the specific tender question did not come up.
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longinvestor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #421 on: May 05, 2019, 06:48:24 AM »
With the annual meeting and associated interviews coming up, it would be extremely disappointing if someone didn't ask the obvious question of how exactly substantial repurchases of stock could be achieved in a reasonable timeframe and by exactly what means. WB is of course unlikely to answer directly, but the fact that no one has questioned him on the logistics of it yet is underwhelming to say the least.
So, the gist of the answers on the buyback questions thus far has been: the stock is/has been moderately undervalued, so we have bought some but we would buy way more if it was cheaper. Exactly how they would achieve those significantly more aggressive repurchases is still a big question mark, though.

Charlie seemed to express a more relaxed attitude towards repurchasing more at higher valuations, although that might be an overinterpretation from me.

I would hope that a tender question comes through, but we may have reached the fill on the buyback topic from the journos at this point, and I'm not putting my hopes on the audience for that.

After sleeping on observing the whole Berkshire AGM thing yesterday, I think this is a precise description of the issue at hand. Depending on how the markets evolve going forward, my overall perception is, that Berkshire will likely be a company sitting on a cash pile north of USD 100 B for a prolonged period going forward while growing at a certain clip its businesses - also depending on how in particular the US economy & the global economy in general evolves going forward.

Unfortunately, the specific tender question did not come up.

Not sure about them always sitting on $100B for a long time. The options we heard yesterday included the potential 25% SEC limit, an insurance industry blow up of idiot capital, an elephant or two, “100B into Utilities “ and of course buybacks in Munger’s “We’ll be quite good when it is obvious”. Plus there could be more Occidental types in the future.

Besides all of the above someone asked if they should be parking their cash in low cost index funds instead of T-bills. That is not off the table for the next guy.

And then can always issue a dividend.

There’s no calamity in my mind. Berkshire’s price is well below value.

Munger kept repeating the theme that we have to endure their stubbornness. They are not about to change. The next guy could be way worse in other ways.
« Last Edit: May 05, 2019, 06:59:14 AM by longinvestor »

shalab

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #422 on: May 05, 2019, 09:37:40 AM »
I agree with Charlie that the buyback rules will be relaxed over time. It is obvious in Berkshire's case as well - where P/B kept moving up from 1.1, 1.2 and in an interview he said the buyback threshold may be close to 1.3. Then they bought back at 207 when P/B was more than 1.3. Essentially this helps inform the shareholders before they turn on the spigot.

Tender offer is highly unlikely for two reasons:
     - berkshire itself doesnt go into auctions when buying companies
     - he has said he doesn't want to take advantage of partners - mentioned it several times in the meeting yesterday

I am happy with 0.3% per quarter buy back rate or about 1% of outstanding shares per year. This can go up to 2-3% per year eventually. If berkshire deploys 100B to buybacks, it won't be Berkshire anymore that can take advantage of market downturns or buy other companies. As Buffett mentioned, a lot of people have invested a lot of cash in Berkshire as a fortress of value and he doesn't want to break that promise. I agree with that.

With the annual meeting and associated interviews coming up, it would be extremely disappointing if someone didn't ask the obvious question of how exactly substantial repurchases of stock could be achieved in a reasonable timeframe and by exactly what means. WB is of course unlikely to answer directly, but the fact that no one has questioned him on the logistics of it yet is underwhelming to say the least.
So, the gist of the answers on the buyback questions thus far has been: the stock is/has been moderately undervalued, so we have bought some but we would buy way more if it was cheaper. Exactly how they would achieve those significantly more aggressive repurchases is still a big question mark, though.

Charlie seemed to express a more relaxed attitude towards repurchasing more at higher valuations, although that might be an overinterpretation from me.

I would hope that a tender question comes through, but we may have reached the fill on the buyback topic from the journos at this point, and I'm not putting my hopes on the audience for that.

After sleeping on observing the whole Berkshire AGM thing yesterday, I think this is a precise description of the issue at hand. Depending on how the markets evolve going forward, my overall perception is, that Berkshire will likely be a company sitting on a cash pile north of USD 100 B for a prolonged period going forward while growing at a certain clip its businesses - also depending on how in particular the US economy & the global economy in general evolves going forward.

Unfortunately, the specific tender question did not come up.

longinvestor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #423 on: May 05, 2019, 10:46:03 AM »
What matters most is the “conservatively calculated”. More so than the yardstick itself. The best question yesterday was the one about the four Grove method of valuation. It has been discussed around here, why not the insurance business? Buffett was not willing to be pinned down with a number on that.

How much?

alwaysinvert

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #424 on: May 05, 2019, 01:02:18 PM »
I absolutely fail to see how a tender offer would take more advantage of shareholders than open market buybacks. If anything, the terms and proceedings are way more upfront. I think the issue, if any, is precisely the opposite - it would be hard to get people to sell at a price that makes sense when they positively know that Buffett is on the other side of the trade. But there could be ways of framing it that would up the acceptance rate and still be honest, for example saying that we will not make another offer for x years and we will not pay a dividend so this is your only chance of a payout, etc.

My impression was that Buffett wanted to be somewhat vague on his plans for buybacks whereas Munger, to Buffett's chagrin, blurted out the honest truth - they will have to pay up more as time goes by. I'm not sure that he actually meant that BRK *didn't* trade at 60-70% of intrinsic value - that was more theoretical reasoning, i.e. saying that obviously we want to buy more if it's cheaper. If he actually has in mind that he will buy lots of stock only when it trades at levels for 170-180 or something of the sort, well, that will probably never happen except in cases where all other stocks fall way more and thus are more attractive. Or, possibly, when he dies.
« Last Edit: May 05, 2019, 01:03:50 PM by alwaysinvert »

CassiusKing1

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #425 on: May 06, 2019, 01:12:43 PM »
What are the rules around Buffett's stake that he's donating to the Gates foundation?  Can those shares be bought back in private transaction blocks?

james22

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #426 on: May 06, 2019, 08:06:01 PM »
Or, possibly, when he dies.

Yeah, don't understand why people fear the share price dropping with Buffett's death when BRK itself would be buying if it fell.
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