Author Topic: Buffett buybacks: Could Berkshire tender stock?  (Read 69048 times)

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #320 on: January 09, 2019, 11:26:48 AM »

More data! [and a bit less talk ...]:

Estimated Berkshire selfimposed acquisition capacity EOP 2018Q3 per company for AAPL and the US banks [ranked]:

AAPL : USD 50,053 M
JPM   : USD 33,438 M
GS    : USD   4,129 M
BAC  : USD   2,329 M
USB  : USD   1,293 M
BK    : USD      891 M

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BRK maximum volume based buybacks at price ceiling 208 [<- known for 2018Q3] for period October 1st - December 14th 2018 - a material part of 2018Q4 : USD 5,454 M.

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Calculation attached.

Bumping this up by quoting, with attachment!

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Anybody of my fellow board members willing to take firm, unconditional & binding  WAG [<- learned that expression from longinvestor! [ : - D ]] stab at:

  • Berkshire portfolio material [quantified by name] additions [net] in 2018Q4,
  • Berkshire buybacks in 2018Q4, measured in USD B, &
  • Berkshire liquidity EOP 2018Q4 [Total cash plus US T-Bills]
? [ : - ) ]
« Last Edit: January 09, 2019, 11:38:11 AM by John Hjorth »
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gfp

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #321 on: January 10, 2019, 10:47:22 AM »
Just a quick update that I did the math on Berkshire's approximate Apple cost basis as of end of Q3 2018.  I know you did the same, John, but I couldn't really see an exact number in your spread sheet.  Maybe I am reading it wrong.

Anyway, here is the last know Apple position at Berkshire and it's cost basis:

255.16 million shares, total cost basis of $36.209 Billion, for an average cost basis of 141.91 / share.

This excludes pension fund holdings.

The first 166.713 million shares were disclosed in the AR as having a 125.73 / share average cost.

*** edit: this is kind of funny since the low from 1/3/2019 was $142/share. ***

Getting back to the Apple discussion - I concur with Stubble. Putting such a huge % of BRK's market cap into Apple bothered me from the start. I hope he's done adding. I rarely question Buffett's purchases but the bear case here is worrisome.

I've been trying to find BRK's ( most recent) cost basis in Apple. Does anyone have it?
« Last Edit: January 10, 2019, 10:53:22 AM by globalfinancepartners »

SwedishValue

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #322 on: January 10, 2019, 11:23:13 AM »
One would have to assume that Apple is worth more now than when Buffett initially bought his stock. It's not like they've been breaking even.

For what it's worth, I'm surprised that Berkshire has underperformed Apple AND DAL since they had their profit warnings. I guess the market has its ways.

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #323 on: January 11, 2019, 01:54:16 PM »
I'm sorry for an unclear post above of mine, globalfinancepartners,

It's about my try to reverse engineer Berkshire's Apple position. To do it I had to make additional assumptions to try to triangulate it. The difference to the reverse engineering of Berkshire buybacks is we have an "extra" fixpoint based in the information in the 10-Qs about buybacks and a reasonable assumption [you did it, and what you proposed made perfect sense to me] how the buy order to the broker is bolted together.

That fixpoint we don't have for the Apple position [quarterly]. So it would be pure guesswork based on my own speculations, and what may come out of the Excel crushing the numbers would most likely be a self-fulfilling prophecy. In short, I would just be fooling myself. So I didn't try to proceed with the calculations. Also, I hope my fellow board members got a good laugh of this brainfart of mine! [ : - ) ]

Also - and especially - the fact that aws has expressed a variant expectation to mine, which is as good as mine, gave me confirmation that doing the calculations was a no-go. Better to wait to mid February to see the size of the Apple position EOP 2018Q4 and the cost of it at a later moment in the Berkshire 2018 10-K.

That said, rough estimates of the cost of the additions to the Apple position for the first 3 quarters of 2018 can still be done now, yes.
« Last Edit: January 11, 2019, 02:04:10 PM by John Hjorth »
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alwaysinvert

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #324 on: February 06, 2019, 03:41:56 PM »
I haven't followed traded volume in BRK lately. Has someone here done continual updates? Q4 report is drawing closer.

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #325 on: February 06, 2019, 11:21:36 PM »
I've been busy with other stuff the last few days, but I'll provide an update for 2018Q4 soon, before we will have the 10-K. That will be Saturday February 23rd 2019, right?

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Next thing must be the 2018Q4 13F-HR on Friday just after market close next Friday, Friday 15th 2019. -I can almost hear the silence around Berkshire lately! - Only 6 [six] SEC filings since last [2018Q3] 13F-HR!

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Tracking the volume on a continuing basis is a great idea. I'll just have to "merge" the files I already have. Personally, I have trouble imagine that the price of Berkshire will stay in "buyback territory" [whatever that specifically means] going forward for prolonged time spans - I consider it too good to think that it will actually happen. Time will tell.

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What are your interim thoughts about the "buyback ceiling" [maximum price for share buybacks] for 2018Q4, gents? gfp has earlier expressed and shared thoughts with us about that it would be adjusted quarterly, perhaps related in a way to the quarterly development in book value per share. [That line of thinking makes sense to me, personally.]

Furthermore, rb has posted earlier, that perhaps the buyback scheme is a bit more nuanced and not so simple as what the reverse engineering of the buybacks for 2018Q3 showed support for. Perhaps a larger percentage than 10 percent of average daily volume, if the market price deviates materially downwards from the buyback ceiling, like we experienced around Christmas?

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Daily volumes for January 2019 - just by looking at a chart - looks about similar to volumes in 2018Q4 - and I would expect Berkshire has been buying back the whole month.

Privately negotiated deals will continue to stay a joker until next 10-Q or 10-K.
”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

longinvestor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #326 on: February 09, 2019, 08:19:03 AM »
Which one is better for shareholders?

Co buying back aggressively, say $10 B over the past quarter? Then wait for another opportunity to buy aggressive ly?

“A little” like a couple of billion a quarter for 10 years?

gfp

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #327 on: February 09, 2019, 08:47:54 AM »
Hard to say what is better for shareholders.  But Berkshire isn't going to repurchase stock aggressively unless it gets really cheap.  The current plan takes in 5-10% of the average daily volume on days the stock is below a cap price. The current plan takes in 10% of ADV as a target, but actually was something like 11% on the B-shares for the 11 actual days they were active.  Harder to calculate on the A-shares because they traded at a premium to the B's during the 7/7-7/24 period, and may not have had the same cap.  It allows them to be active during what would otherwise be blackout periods and it accomplishes Buffett's goal of not manipulating the share price (much).

If he got some big blocks of stock offered to him he would probably take them.  But those seem infrequent, so this slow dribble of - at best - less than $4 Billion per quarter will probably be all we get.

I estimate Q4 repurchases were somewhere between $1.5 Billion and $2.7 Billion $2 Billion and $3.5 Billion, depending on how they figure the cap price.  I would expect that they continued share repurchases subsequent to quarter end as well, which we will be able to tell when they file the 10K with a share count as of mid-Feb.


Which one is better for shareholders?

Co buying back aggressively, say $10 B over the past quarter? Then wait for another opportunity to buy aggressive ly?

“A little” like a couple of billion a quarter for 10 years?
« Last Edit: February 09, 2019, 12:22:37 PM by gfp »

longinvestor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #328 on: February 09, 2019, 02:45:23 PM »
In the case of Berkshire Hathaway price is arguably influenced more by disclosure that they have been buying via SEC filing than the percentage of ADV that they actually bought. The stock price has not moved much no matter whether they bought 5% or 25% over the past 4 months. It’s not moved because of buyback volume at least in one quarter.

From all answers provided by Buffett on this subject they are likely to be opportunistic, aggressive but always relative to what other (better) opportunities they are presented with at any given point in time. Buffett has made some comments of late that they are not currently being offered greater deals. I get the sense that buybacks are always plan B for Buffett and Munger. For the next guy it could well be plan A.

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #329 on: February 09, 2019, 05:15:17 PM »
Attached is the file I posted on December 29th 2018, now updated with the last trading day in 2018, December 31st 2018.

I have [mechanically] projected the reverse engineering outcome from 2018Q3 to 2018Q4 [I have no other reasonable fixpoints as of now - the information will be available in the 10-K that we will see soon].

The file indicates a bit north of USD 4 B in buybacks [~ USD 4.2 B] for 2018Q4.

The file also indicates a quarterly volume of USD 75 B, indicating monthly volume of USD 25 B for the quarter at an average volume based stock price of 207.66. [Elaboration: If the buyback threshold was 230, the broker running the buybacks would be buying 10 percent of everything every day, then indicated in that case, that the buybacks would be USD 7.453 B - ten times that figure is ~ USD 75 B for the quarter.]

Still no bling in the file.
”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