Author Topic: Berkshire closed down to near book value  (Read 29662 times)

Ballinvarosig Investors

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Re: Berkshire closed down to near book value
« Reply #110 on: July 13, 2020, 01:50:11 PM »
While I understand that WEB is focused on getting through this crisis instead of repurchasing shares, if they are unwilling to support the prices at these levels through a repurchase, doesn't that also imply that the premium to book value isn't that big? Either that or if he wants to hold additional liquidity, maybe book value may actually come down?
Not sure what you mean by this. As per the above post, it looks like he's bought back 1.2% of stock in Q2. This is pretty meaningful activity if you ask me.


scorpioncapital

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Re: Berkshire closed down to near book value
« Reply #111 on: July 14, 2020, 04:49:29 AM »
If he buys 1.2% per quarter or 4.8% a year, then Berkshire will be entirely bought and private in just 20 years although I suspect the batch of 5% in year 19 is going to be a lot higher than today's 180 a share )

AzCactus

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Re: Berkshire closed down to near book value
« Reply #112 on: July 14, 2020, 06:09:02 AM »
If he buys 1.2% per quarter or 4.8% a year, then Berkshire will be entirely bought and private in just 20 years although I suspect the batch of 5% in year 19 is going to be a lot higher than today's 180 a share )

I imagine you are kinda joking---but while the math is right this is a really poor way to look at things.  Obviously Berkshire won't buy the same amount every quarter and as a shareholder I don't really want them to.  I would rather they buyback shares when they are a bargain.  Had Berkshire bought back 5% of shares at sub 180 level that would have been awesome.  If today shares were at 220, I would imagine/hope he would be more prudent. 

longinvestor

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Re: Berkshire closed down to near book value
« Reply #113 on: July 14, 2020, 07:24:57 AM »
For the entire duration since the intention of buying back was announced, the market had denied the opportunity to buyback by pricing the stock just about the threshold. That changed in 2018 and now the market is watching what Omaha does during the most recent 30-45 days. It is plausible that it would take another $5 B buyback quarter or two for the market pricing mechanism to gel. It makes a lot of sense to leave the market guessing by not showing clear or predictable intention. Buffett and his junior can always say that they were looking at an elephant when stepping off the gas. They need to buy for 10-20 years. Itís a high class problem and not any calamity at all. Few others have this problem.
« Last Edit: July 14, 2020, 08:14:01 AM by longinvestor »

Palantir

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Re: Berkshire closed down to near book value
« Reply #114 on: July 14, 2020, 02:35:04 PM »
For the entire duration since the intention of buying back was announced, the market had denied the opportunity to buyback by pricing the stock just about the threshold. That changed in 2018 and now the market is watching what Omaha does during the most recent 30-45 days. It is plausible that it would take another $5 B buyback quarter or two for the market pricing mechanism to gel. It makes a lot of sense to leave the market guessing by not showing clear or predictable intention. Buffett and his junior can always say that they were looking at an elephant when stepping off the gas. They need to buy for 10-20 years. Itís a high class problem and not any calamity at all. Few others have this problem.

But why play all these mindgames with the market when instead they can just simply announce and execute a massive buyback?
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John Hjorth

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Re: Berkshire closed down to near book value
« Reply #115 on: July 14, 2020, 03:42:39 PM »
But why play all these mindgames with the market when instead they can just simply announce and execute a massive buyback?

Because there are literally billions of dollars at stake for the continuing, long term shareholders of Berkshire, to get this right - long term, ref. also longinvestors post.
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sleepydragon

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Re: Berkshire closed down to near book value
« Reply #116 on: July 14, 2020, 04:20:03 PM »
For the entire duration since the intention of buying back was announced, the market had denied the opportunity to buyback by pricing the stock just about the threshold. That changed in 2018 and now the market is watching what Omaha does during the most recent 30-45 days. It is plausible that it would take another $5 B buyback quarter or two for the market pricing mechanism to gel. It makes a lot of sense to leave the market guessing by not showing clear or predictable intention. Buffett and his junior can always say that they were looking at an elephant when stepping off the gas. They need to buy for 10-20 years. Itís a high class problem and not any calamity at all. Few others have this problem.

But why play all these mindgames with the market when instead they can just simply announce and execute a massive buyback?

At other companies, the purpose of buybacks is to benefit selling shareholders.
At Berkshire, the purpose of the buyback is to benefit remaining shareholders.

longinvestor

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Re: Berkshire closed down to near book value
« Reply #117 on: July 14, 2020, 04:49:40 PM »
For the entire duration since the intention of buying back was announced, the market had denied the opportunity to buyback by pricing the stock just about the threshold. That changed in 2018 and now the market is watching what Omaha does during the most recent 30-45 days. It is plausible that it would take another $5 B buyback quarter or two for the market pricing mechanism to gel. It makes a lot of sense to leave the market guessing by not showing clear or predictable intention. Buffett and his junior can always say that they were looking at an elephant when stepping off the gas. They need to buy for 10-20 years. Itís a high class problem and not any calamity at all. Few others have this problem.

But why play all these mindgames with the market when instead they can just simply announce and execute a massive buyback?

At other companies, the purpose of buybacks is to benefit selling shareholders.
At Berkshire, the purpose of the buyback is to benefit remaining shareholders.
Well said, Iíll use this. Thanks

The awkwardness of being rich and cash pouring in has a second order problem. Especially for the next guy. Buffett cares deeply about the attitude of shareholders towards that guy. Itís a tough job and Buffett would much rather take the brickbats now so that the next guy can be placed in a likable situation. For that to happen, the price has to stay below IV for a long enough time. Buffett is unlikely to do or say anything to not allow low prices. The shareholder friendly culture depends quite on a lot on the buyback runway to be long. Buffett is choosing his very conservative posture on the buyback threshold, Munger actually let it slip that theyíre likely to be more liberal in the future. All meant to let the new guy to ease into the job for a while. Practicing mistake avoidance.

Not to get too melancholic here, Buffett could motor on to 100 and bag a couple of elephants. 😉

StubbleJumper

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Re: Berkshire closed down to near book value
« Reply #118 on: July 14, 2020, 04:51:42 PM »
For the entire duration since the intention of buying back was announced, the market had denied the opportunity to buyback by pricing the stock just about the threshold. That changed in 2018 and now the market is watching what Omaha does during the most recent 30-45 days. It is plausible that it would take another $5 B buyback quarter or two for the market pricing mechanism to gel. It makes a lot of sense to leave the market guessing by not showing clear or predictable intention. Buffett and his junior can always say that they were looking at an elephant when stepping off the gas. They need to buy for 10-20 years. Itís a high class problem and not any calamity at all. Few others have this problem.

But why play all these mindgames with the market when instead they can just simply announce and execute a massive buyback?

At other companies, the purpose of buybacks is to benefit selling shareholders management who gave themselves an obscene stock option allotment.
At Berkshire, the purpose of the buyback is to benefit remaining shareholders.


There, I fixed it for you.


SJ

Palantir

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Re: Berkshire closed down to near book value
« Reply #119 on: August 07, 2020, 07:58:36 PM »
Quote from: longinvestor

The awkwardness of being rich and cash pouring in has a second order problem. Especially for the next guy. Buffett cares deeply about the attitude of shareholders towards that guy. Itís a tough job and Buffett would much rather take the brickbats now so that the next guy can be placed in a likable situation. For that to happen, the price has to stay below IV for a long enough time. Buffett is unlikely to do or say anything to not allow low prices. The shareholder friendly culture depends quite on a lot on the buyback runway to be long.

But why? If they wanted the gap between intrinsic value and prove to be realized, which they should, why would they want a long runway? They should close it as soon as possible.
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