Author Topic: Buffett buybacks: Could Berkshire tender stock?  (Read 147900 times)

gfp

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #450 on: August 03, 2019, 09:11:02 AM »
John, the first quarter 2019 repurchases cost $1.69 Billion.  The second quarter repurchases cost $443 million (rounded up).

2.133 Billion minus 1.69 Billion gets you to the 443

The discrepancy in the Q1 cash flow statement likely results from the fact they were purchasing right up through quarter end (March 29th), and cash had not left the building for the settlement of some of the last shares purchased yet.  That's why the number in cash flow statement says 1.585 B in Q1, when in fact 1.69 billion worth of shares had been purchased.  Settlement is 3 days in the US

Quote
scorpioncapital,

I appears to me you have been looking at the movements in share counts for A & B in note 20 on p. 21. Those movements are half-year figures. You find the exact figures for the quarter on p. 47.

The easiest way to get the capital spent in the quarter on buybacks is to look up treasury stock acquired in the cash flow statement and calculate the difference to last quarter [in casu : USD 2,133 M - USD 1,585 M = USD 548 M].

If you calculate directly based on the buyback specification, you get USD 442 M.

The cash flow statement for 2019H1 ties with the buyback specifications for 2019Q1 and 2019Q2 on a total level, while there for 2019Q1 is an inconsistency between the cash flow statement and the buyback specification amounting USD 106 M.

Because the numbers fits on a total level for 2019H1, I dare to posture that there is an error in the cash flow statement in the Berkshire 2019Q1 10-Q [0_0]+[*holding my head low* & *arms up in front of my head* for incoming rotten tomatoes, rotten eggs, Scud missiles and the like!].

- - - o 0 o - - -


obtuse_investor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #451 on: August 03, 2019, 09:30:03 AM »
To corroborate the repurchase numbers you can always check CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY. The $443M number is plainly mentioned there.

On a more strategic note, I can’t wait for the media to get bored and move on to some topic other than repurchases at BRK. Buffett is playing the long game. I am happy to play along.
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aws

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #452 on: August 03, 2019, 11:25:10 AM »
The shares outstanding on July 25th was exactly the same as June 30th, so they didn't repurchase any in the interim either.  That's not too surprising since it was only below $210 for a few days toward the end of that period.

His average repurchase this year has been at about $201 per share, so it seems like the price would need to be considerably under $200 for a reasonably long period of time for repurchases to be substantial.  I've definitely overestimated the degree to which he wants to repurchase shares and the price at which he was willing to do so.  This was mostly based on the initial data points in Q3 2018 and all of the talk since that day, but if anything it seems like he is less willing to do buybacks now by any metric than he was a year ago, despite all the talk to the contrary and the continual building of cash. 

If this were not the case then:

1. His aggressive buyback range would have crept up higher by now, so we'd see repurchases at higher prices
2. That more shares per day would be purchased when it was in that range, especially on the cheapest days

In Q3 2018, when he only had the authority to buyback shares for a few weeks, resulted in him repurchasing $927mm of shares over 14 trading days, an average of $66mm/day, at an average price of $207/sh.  Nine months later, the book value has finally increased beyond the Q3 18 level.  It's now about 2% higher, so you would think that if his appetite to repurchase shares were the same now as it was in Q3 2018, then his aggressive range would be about $211.

But he didn't buy any in May until the 28th, forgoing buybacks on days when the price ranged $200-205.  When it did break $200 he was buying, but over those four days he only spent $205mm or $51mm/day.  Considering Berkshire generates enough cash to do about $100mm in buybacks per trading day over the course a year, this is a paltry amount that would only slow the cash build rather than put excess cash to work.

It is disappointing in the sense that it seems like opportunities are being missed, but it's only clear in hindsight that he wouldn't find a better use for the cash, and even then I probably overestimate the impact of the missed repurchases.  I certainly hope he picks up the pace of repurchases, but I think I can live it and sleep relatively easy knowing that the cash will eventually go to quite a good use.

longinvestor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #453 on: August 04, 2019, 05:39:43 AM »
Buying

..as rapidly as possible - KO, AXP, AAPL
..as slowly as possible - BRK

makes a lot of sense.


John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #454 on: August 05, 2019, 01:22:16 AM »
... The discrepancy in the Q1 cash flow statement likely results from the fact they were purchasing right up through quarter end (March 29th), and cash had not left the building for the settlement of some of the last shares purchased yet.  That's why the number in cash flow statement says 1.585 B in Q1, when in fact 1.69 billion worth of shares had been purchased.  Settlement is 3 days in US.

Thank you for a convincing explanation, gfp,

That said, personally I would have brought the buyback specification to tie with the cash flow statement for 2019Q1 by adding the USD 106 M to "Treasury stock acquired" in the cash flow statement and accruing the same amount in top of the cash flow statement in the adjustments to earnings in the line "Changes in operating assets - Other liabilities" [Consolidation adjustment, or just enter the actual settlement debt in the general ledger for the parent before firing up the consolidation system].

And well, it doesn't really matter - it's peanuts for Berkshire.

- - - o 0 o - - -

On another note more related to this topic - the possibility of a stock tender from Berkshire - and after spending a lot of time on Berkshire in the weekend - I did the same calculation that aws did to find out if shares were bought back in 2019Q3 till July 25th, and reached the same conclusion as aws. What caught my eye was the extent of conversions of A-shares - 5,919 converted in 2019H1 and 772 non-Buffett shares converted in the business days of the first 25 days of 2019Q3.

Isn't that a lot? Anyone have any idea of what that activity is a token of? - It could be "the opposite" of a tender,  i.e. Berkshire refusing to buy stocks from A-holders, who - for one reason or another - are in need for cash [Estate settlements or partly sales to cover inheritance taxes under transfer of shares within generations.]
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alwaysinvert

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #455 on: August 05, 2019, 01:46:58 AM »
Mainly it's because of this: https://www.forbes.com/sites/robertwood/2019/07/09/warren-buffett-gives-3-6-billion-to-charity-how-to-supersize-your-donations-too/

My first guess would be that the non-Buffett shares are also somehow charity related.

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #456 on: August 05, 2019, 01:56:31 AM »
alwaysinvert,

I have already omitted/excluded Mr. Buffett's conversion on July 1st ref. :

... 5,919 converted in 2019H1 and 772 non-Buffett shares converted in the business days of the first 25 days of 2019Q3. ...

These conversions being charity related - like Buffett's - seems highly likely.
« Last Edit: August 05, 2019, 02:00:30 AM by John Hjorth »
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alwaysinvert

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #457 on: August 05, 2019, 02:33:13 AM »
The shares outstanding on July 25th was exactly the same as June 30th, so they didn't repurchase any in the interim either.  That's not too surprising since it was only below $210 for a few days toward the end of that period.

His average repurchase this year has been at about $201 per share, so it seems like the price would need to be considerably under $200 for a reasonably long period of time for repurchases to be substantial.  I've definitely overestimated the degree to which he wants to repurchase shares and the price at which he was willing to do so.  This was mostly based on the initial data points in Q3 2018 and all of the talk since that day, but if anything it seems like he is less willing to do buybacks now by any metric than he was a year ago, despite all the talk to the contrary and the continual building of cash. 

If this were not the case then:

1. His aggressive buyback range would have crept up higher by now, so we'd see repurchases at higher prices
2. That more shares per day would be purchased when it was in that range, especially on the cheapest days

In Q3 2018, when he only had the authority to buyback shares for a few weeks, resulted in him repurchasing $927mm of shares over 14 trading days, an average of $66mm/day, at an average price of $207/sh.  Nine months later, the book value has finally increased beyond the Q3 18 level.  It's now about 2% higher, so you would think that if his appetite to repurchase shares were the same now as it was in Q3 2018, then his aggressive range would be about $211.

But he didn't buy any in May until the 28th, forgoing buybacks on days when the price ranged $200-205.  When it did break $200 he was buying, but over those four days he only spent $205mm or $51mm/day.  Considering Berkshire generates enough cash to do about $100mm in buybacks per trading day over the course a year, this is a paltry amount that would only slow the cash build rather than put excess cash to work.

It is disappointing in the sense that it seems like opportunities are being missed, but it's only clear in hindsight that he wouldn't find a better use for the cash, and even then I probably overestimate the impact of the missed repurchases.  I certainly hope he picks up the pace of repurchases, but I think I can live it and sleep relatively easy knowing that the cash will eventually go to quite a good use.

I still think the main complication is that he can't get size and this was tested a bit in Q3 2018, with the result being that the stock gained pretty much every day for a month. If he could get $10b worth of stock at $200, I'm sure he wouldn't mind. But the issue is that if he ratcheted up buybacks fast in any one period, the market would be informed before he could gain much ground. He needs to somehow convince the market that he won't backstop the stock price and has failed to do so thus far. Hence the tepid buybacks.

This makes it sound like buybacks is the only thing on his mind, which obviously is not true. However, any feasible strategy for long-term use of funds without dividending out portions must necessarily include sizable buybacks.

SwedishValue

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #458 on: November 02, 2019, 05:16:43 AM »
According to my math, Buffett has continued to repurchase shares in October corresponding to 1686 A-share equivalents. That would be around 500 Million USD up until the 24th of October.

This is in addition to the 213 A shares and 3 168 863 B shares he bought back in q3 for around 700 Million USD (didn't bother with the exact number here, it's thumb-sucking levels anyway).

DooDiligence

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #459 on: November 02, 2019, 06:05:21 AM »
According to my math, Buffett has continued to repurchase shares in October corresponding to 1686 A-share equivalents. That would be around 500 Million USD up until the 24th of October.

This is in addition to the 213 A shares and 3 168 863 B shares he bought back in q3 for around 700 Million USD (didn't bother with the exact number here, it's thumb-sucking levels anyway).

Seems like just losing pocket change in the sofa.
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