Author Topic: Share Repurchases  (Read 32899 times)

longinvestor

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Re: Share Repurchases
« Reply #80 on: August 12, 2019, 08:56:48 AM »
Insurance $aved their a$$ during the 1960’s, 70’s. The $8.6 Million into NICO was juiced out of the textile business! Textiles, retail, blue chip stamps all of which went bust in due course. It’s a far cry today, energy, railroad etc. can hardly be described in the same terms. They can put $100’s of billions to work, let’s see if Jain and his troops do so. The contrast of quality between 1970 and 2020 couldn’t be more stark. All good, but for the stock price. There’s a plan for that too!


John Hjorth

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Re: Share Repurchases
« Reply #81 on: August 12, 2019, 10:01:40 AM »
The Berkshire A & B shares - bought back since the implementation of "structured" buyback programmes [first max. 1.1 x BV, next max. 1.2 X BV, then [& now] "Mr. Buffett & Mr. Munger decide"] - are they retired? [or are they held in treasury, and thereby constituting potential acquisition capacity [dry powder]]? [Not that I think this would take place at the recent market price levels.]
« Last Edit: August 12, 2019, 10:07:11 AM by John Hjorth »
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AdjustedEarnings

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Re: Share Repurchases
« Reply #82 on: August 13, 2019, 06:22:37 AM »
The Berkshire A & B shares - bought back since the implementation of "structured" buyback programmes [first max. 1.1 x BV, next max. 1.2 X BV, then [& now] "Mr. Buffett & Mr. Munger decide"] - are they retired? [or are they held in treasury, and thereby constituting potential acquisition capacity [dry powder]]? [Not that I think this would take place at the recent market price levels.]

Retiring/canceling shares is merely a procedural matter. It will not make any difference to how much stock they can issue in an acquisition. At this price, I don't think a stock acquisition is a possibility because sellers don't impute value to an undervalued stock (and so they don't accept a lower multiple). Nor is a stock transaction necessary, given the issue we're discussing here being too much cash.

gfp

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Re: Share Repurchases
« Reply #83 on: August 13, 2019, 06:24:34 AM »
The Berkshire A & B shares - bought back since the implementation of "structured" buyback programmes [first max. 1.1 x BV, next max. 1.2 X BV, then [& now] "Mr. Buffett & Mr. Munger decide"] - are they retired? [or are they held in treasury, and thereby constituting potential acquisition capacity [dry powder]]? [Not that I think this would take place at the recent market price levels.]

Treasury stock, at cost

(5,242)

They are treasury shares at the moment.  No big difference as mentioned above

omagh

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Re: Share Repurchases
« Reply #84 on: August 17, 2019, 07:12:16 AM »
https://www.morningstar.com/articles/942242/5-reasons-to-consider-buying-berkshire-hathaway?dtr

Quote
Berkshire Is Undervalued
Fifth, Berkshire’s shares are undervalued in a market that is nearly fairly valued. At today’s prices, Berkshire is trading at 79% of our fair value estimates of $380,000 (Class A) and $253 (Class B), relative to the universe of stocks we cover at 96%, implying a solid double-digit gain for Berkshire’s shares should they reach our fair value estimate. On a price/book basis, the shares are currently trading at 1.28 times second-quarter book value per share and 1.20 and 1.10 times our estimates of book value per share at the end of 2019 and 2020, respectively. We believe that Buffett’s willingness to buy back shares at prices between 1.2 and 1.4 times book value per share (and more aggressively below 1.3 times) should help to provide a bit of a floor for the stock in the near to medium term.

Viking

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Re: Share Repurchases
« Reply #85 on: August 17, 2019, 10:00:35 AM »
Omagh, thanks for posting the BRK summary from Morningstar. Below $200 it certainly looks like a reasonable buy. It will be interesting to see what Buffett does if the share price falls into the $180’s should we see more selling in the overall market due to economic weakness.

Key weakness: a large chunk of the businesses are cyclical (railraod, banking etc) which will slow if the economy slows

Important question: how will large drop in bond yields affect the large insurance business. Perhaps this will affect competitors more (who rely on bond yields more than BRK does in their investment portfolio). How Buffett invests the insurance float (equities) may prove to be an advantage versus competitors if bond yields continue to move lower.

omagh

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Re: Share Repurchases
« Reply #86 on: August 18, 2019, 08:30:58 AM »
Agree on the competitors.  They have an immediate windfall from cap gains on their bond portfolios, but will be hard-pressed to fund their future insurance liabilities.  I'm in the process of selling down a long-held stake in WR Berkley as it has become inflated at $13.2B market cap on $6B book value.  It has limited upside from here, mostly relying on continued BV multiple expansion.  As my general rule, 2xBV is an expensive proposition for an insurance company.  At this point, I'd rather pay the cap gain taxes and hold cash than hold the shares through a downturn and watch the multiple collapse back to 1xBV.  It will be easier to put money to work at high rates in the future.

At this point, I'm only holding BRK in the insurance space.  Buffett has done a tremendous job of building a float machine.  Chris Bloomstran at Semper Augustus has a wonderful write-up on how the energy business and the railroad business are able to generate further ways to use insurance float through accelerated depreciation accounting rules.  Even if the railroad business isn't throwing off cash due to cyclicality of the overall economy, Buffett will still be able to run insurance operating profits and cap gains through the railroad business' accelerated depreciation shield.

- O
Important question: how will large drop in bond yields affect the large insurance business. Perhaps this will affect competitors more (who rely on bond yields more than BRK does in their investment portfolio). How Buffett invests the insurance float (equities) may prove to be an advantage versus competitors if bond yields continue to move lower.

John Hjorth

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Re: Share Repurchases
« Reply #87 on: August 18, 2019, 12:59:21 PM »
Retiring/canceling shares is merely a procedural matter. It will not make any difference to how much stock they can issue in an acquisition. At this price, I don't think a stock acquisition is a possibility because sellers don't impute value to an undervalued stock (and so they don't accept a lower multiple). Nor is a stock transaction necessary, given the issue we're discussing here being too much cash.
Treasury stock, at cost

(5,242)

They are treasury shares at the moment.  No big difference as mentioned above.

Thank you, AdjustedEarnings & gfp,

In short, I prefer to ask here when in doubt instead of making implicit personal assumptions [, that may be wrong]. [I will late forget what I've learned from the discussions about SEC filings and US capital market law in the "Could Berkshire tender stock?" topic started by alwaysinvert.] Company law, capital market law and regulations of filings with the stock exchange works in a very different way in my home country with regard to share buybacks.

Yes, the question was highly hypothetical, given the actual circumstances on overall basis right now. Thanks.
”In the race of excellence … there is no finish line.”
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John Hjorth

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Re: Share Repurchases
« Reply #88 on: August 18, 2019, 01:25:59 PM »
Posted by CorpRaider in the "Semper Augustus letter" topic here in the Berskshire forum here on CoBF :

I feel like CAPE without all these Seigel adjustments picks a lot of that up too (for macro purposes).  Like, Jeremy...they don't need any help inflating earnings bro...incentives matter.  "Yeah everyone dumped in huge losses in 2008, so let's exclude that...no, let's not do that mmmmkay?"

Going to look at the longer stuff to see what he says/thinks about float.  i.e. if the longer-term recent run rate BRK ROE is 10% what about the float/holdco leverage (that's kind of what I've been thinking).

I'm sorry for double posting. Has the structural situation of Berkshire Hathaway, - the parent - ever been discussed or analyzed here on CoBF? I haven't been able to find something so far.
« Last Edit: August 19, 2019, 08:01:21 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