Author Topic: Buffett buybacks: Could Berkshire tender stock?  (Read 127285 times)

John Hjorth

  • Hero Member
  • *****
  • Posts: 2701
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #90 on: September 29, 2018, 12:57:51 AM »
SwedishValue,

Personally, I think our primary source should be the NYSE numbers, as a direct source, i.e. for the B share you find the daily turnover here. How do those numbers compare to yours?
« Last Edit: September 29, 2018, 01:26:05 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai


SwedishValue

  • Full Member
  • ***
  • Posts: 113
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #91 on: September 29, 2018, 01:15:42 AM »
Thanks for providing the link. My new figures are that

154 990 202 B-shares have been traded.
10 531 A-shares have been traded.

If 25% of daily volume has been bought back, this means USD 8,14 BN of B-shares have been bought back, and USD 0.83 BN of A-shares have been bought back. Combined, just below USD 9 BN could have been bought back if 25% of daily volume was targeted.

John Hjorth, can you confirm or refute whether 25% of daily volume is a hard cap for buybacks that applies to Berkshire? I read it somewhere, forgot where.

John Hjorth

  • Hero Member
  • *****
  • Posts: 2701
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #92 on: September 29, 2018, 01:20:44 AM »
SwedishValue,

According to Dynamic's study of the rules, ref. Dynamic's post here, it's max. 25 percent of the average daily volume. There are some valuable posts by globalfinancepartners about this matter and the details of it on here, too.
« Last Edit: September 29, 2018, 01:35:17 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

Dynamic

  • Hero Member
  • *****
  • Posts: 531
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #93 on: September 29, 2018, 04:52:23 AM »
I knew nothing before finding that investopedia article.

I'd be quite surprised if Berkshire has repurchased anything close to 25% this quarter, so any subtleties in interpretation of the rules are probably moot, and an approximate upper bound on open market repurchases is all we're likely to establish so these figures look about right.

If the excess cash is just below float until the next major opportunity to invest it at a good price, I'll be happy enough.

nickenumbers

  • Full Member
  • ***
  • Posts: 210
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #94 on: September 29, 2018, 03:59:53 PM »
I can't wait to see how much they have repurchased.  If they repurchased something more than a pittance, do you guys think it serves as a catalyst to increase the share price to higher levels?

Does anyone want to guesstimate what price the stock increases to under that scenario?

Are there any significant detractors from the share price in the near term?

[PS- I get the Ben Graham Stock Market voting machine-shorter them  weighing machine-long term.
The fastest Cheetah still waits for the lame baby antelope.  ..patience..

SwedishValue

  • Full Member
  • ***
  • Posts: 113
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #95 on: September 30, 2018, 02:58:26 AM »
A significant buybacks represents a few things.

First of all, it represents that Buffett considers the present market valuation of Berkshire to be significantly below intrinsic value. This has a few implications in turn.

1. If Buffett is right, which is my default option, then buying Berkshire at these rates provides an attractive investment opportunity both for Berkshire and for the private investor.
2. Share buybacks are likely to be sustained unless the share price appreciates significantly.
3. 1 & 2 combined gives that additional, continuous value creation from buybacks will accrue to remaining shareholders.

Secondly, we have a liquidity aspect of the buybacks. Intrinsic value chugs along and grows at a nice albeit slow rate. It is unlikely that intrinsic value will significantly deviate either up or down over short periods of time. In this scenario, having Buffett buy back a significant percentage of the daily trading volume, is likely to decrease the short-term downside of the Berkshire stock price compared with the upside.

I think a significant buyback is very material for the implications stated above. I would consider it a 10% event on the stock price for me personally, but I think a likely market reaction more is along the lines of 3-4% (which would present an additional buying opportunity for the savy investor, in my opinion).

John Hjorth

  • Hero Member
  • *****
  • Posts: 2701
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #96 on: September 30, 2018, 03:28:36 AM »
All we heard was that quip “Yeah we bought a little”. ...

This is still the only fact we have. So, yes, trying by now to triangulate with some kind of precision maximum buyback volume actually appear a bit "academic" [<- [: - ) ]], ref. what Dynamic is implying, when that maximum volume is actually meaningful.

[Academic can in this context be defined as a well thought out & in-depth analysis of something without relevance to anything. [ : - ) ]]
« Last Edit: September 30, 2018, 03:36:49 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

SwedishValue

  • Full Member
  • ***
  • Posts: 113
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #97 on: September 30, 2018, 03:40:04 AM »
I don't agree. He had this interview the 19th trading day after the Q2-report was issued. At that time, around USD 4 Billion would have been the maximum possible open market buyback that Buffett could have orchestrated, less than 0.8% of shares outstanding. I don't think "we bought a little" means that we can exclude him having bought back around the maximum threshold.

I think it's more likely that Buffett bought back closer to the max amount of shares (25% of average trading volume) than having him buy back 10% or less. Simply for the fact that Buffett likes to behave opportunistically. If he finds it to make sense at 10% of average trading volume, then why not make it 25%?

But there's no way we will know before early November. I just wanna lay out my arguments here so that they possibly can get shot down and make me change my mind about this being a very special situation.

longinvestor

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1778
  • Never interrupt compounding unnecessarily -Munger
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #98 on: September 30, 2018, 07:05:25 AM »
The narrative surrounding the buyback is far more significant here. And it changed from the prior narrative.

 As recently as in May this year, Buffett explicitly stated that they would buy only slightly above the 1.2x BV. Like 1.25 or 1.27x. During the CNBC interview, besides the “yeah we bought a little “, his admission of sorts that they should have been using “intrinsic business value all along” is what we should be discussing. He basically threw the BV yardstick out of the window. Although he’s been telegraphing it for several years through the annual letter, it’s huge that it happened. I wasn’t expecting it in 2018, more like in the next decade.

So.what changed? I like to believe that he and Charlie ran their own “Owner Earnings from here to judgment day discounted to present value” given the monumental jump in earnings this year. The facts have changed and they change with that.

alwaysinvert

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 857
    • värdeinvesteraren
Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #99 on: September 30, 2018, 09:23:51 AM »
Here's my prediction: the headline number for buybacks won't be obviously enormous at first glance, partly due to him not buying back stock for the whole quarter. But as investors start calculating the actual number of trading days that Buffett will have been able to buy the stock, they will start to realize that he considered it a significant bargain at around current levels ($214). Will the market react heavily to this realization? I don't know the answer to that.   
« Last Edit: September 30, 2018, 09:27:43 AM by alwaysinvert »