Author Topic: Buffett buybacks: Could Berkshire tender stock?  (Read 147996 times)

Dynamic

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #170 on: November 01, 2018, 04:18:26 PM »
It will certainly be interesting to see the number of shares outstanding at 30 Sep 2018 and those around Fri 26 Oct (printed at the foot of the front page of the 10-Q) especially as BRK.B has spent half of October at around $215-$224 and then dropped to below $210 and as low as about $197.50 during the session on 26 Oct (I topped up my exposure around that level on Friday).

On the old faithful metric of Book Value Per Share, the quarter probably ended around $228,500 per A or ~$152.30 per B share, but has since dropped thanks to the assumed stock portfolio retracing a lot of its gains, alongside the market in general. I'd guess ~$197.50 was just below 1.3x BVPS at quarter end, but just above 1.3x BVPS when adjusting for the portfolio decline and typical earnings over 26 days. 1,3x BVPS has typically been a good buy point, though the rare times below 1.25x BVPS (e.g. Jan-Feb 2016) are obviously even better and limit the near term downside risk enormously.

My thought is that that ratio of IV to BV has increased a little and this is recognised by Mr Market, and prices significantly below 1.3x BVPS will perhaps be rarer still over future years. BRK purchased at such a price is likely to return inflation+ 6% to 9% compounding with quite a high probability to my mind, and short term downside risk is likely to be limited to about 10% except in the depths of a major bear market, making Berkshire stock at that price a great place to earn a healthy compound return if held long term with a short-term return distribution skewed significantly to the upside, while retaining optionality close to that of cash, allowing me to redeploy my funds at short notice if I happen to find a bargain high conviction opportunity that warrants substantial exposure (and these high conviction ideas might be once in 3-5 year finds so on average I have plenty of time to compound value while I'm waiting). Berkshire also carries, to my mind, very little company risk, because Berkshire has so many diverse earnings streams and autonomously run subsidiaries operating in only modestly correlated areas of the economy, and because it is famously a prudent long-term capital allocator with a strong aversion to permanent loss of capital.

While the opportunities around $185-190 in late July were great buy points to me, I suspect that prices around $198-205 now that the buyback rules have changed will be very likely to have seen significant buyback volume in October, though as SwedishValue points out, it might still do little more than offset the cash inflows from operations given the limitations offered by SEC Safe Harbor guidelines.
« Last Edit: November 01, 2018, 04:24:01 PM by Dynamic »


SwedishValue

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #171 on: November 02, 2018, 12:00:03 AM »
”It will certainly be interesting to see the number of shares outstanding at 30 Sep 2018 and those around Fri 26 Oct (printed at the foot of the front page of the 10-Q)”

The second part of this statement was news to me. Are you saying we will also get to know part of October’s buyback activity? Great news in that case!

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #172 on: November 02, 2018, 12:06:06 AM »
SwedishValue,

Or close to the end of October 2018. On the front page of the 2018Q2 10-Q the share count for outstanding shares was as per July 26th 2018.
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SwedishValue

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #173 on: November 02, 2018, 12:24:43 AM »
Thanks. I'm just very confused. This is not the way it works in Sweden and I just somehow assumed they would not have to file anything that would give away what they have been doing in the 4th quarter. Thanks for helping me out.

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #174 on: November 02, 2018, 12:37:06 AM »
Admitted, you're not the only one to be confused here, SwedishValue [ : - ) ],

Yesterday I was studying the C 2018Q3 10-Q. C reports at that spot outstanding shares at end of 2018Q3.
”In the race of excellence … there is no finish line.”
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Dynamic

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #175 on: November 02, 2018, 08:01:13 AM »
It's quite possible, if what John noticed about Citibank is anything to go by, that Berkshire will change its practice regarding revealing the number of shares in issue shortly before the date the 10-K is released, particularly now that meaningful sums from the cash balance could have been spent on buybacks to reduce the share count, which would affect both the balance sheet and cash flow statement as well as the share count itself.

I guess the only significant purpose now in providing the share count is in allowing people and entities with SEC filing requirements of their own to determine their fractional stake in each class of share as of the most recent disclosure by Berkshire and report it appropriately to the SEC in Form 4 or 13 D/G filings etc. Beyond that it's an unnecessary early disclosure of the buyback rate, although in most time it wouldn't give too much away about their conservative appraisal of IV.

Last quarter the earnings release time of Saturday at about 8am was announced on the preceding Thursday, though that wasn't the case last November except for annual reports, but has been the case for every quarter since. I wonder if in the absence of such a News Release yesterday or so far today we might guess that Berkshire's 10-Q will be released next week - Fri 9th Nov or Sat 10th - rather than today after the closing bell or tomorrow as a few financial data providers had guessed based on previous filings such as Fri 3rd Nov 2017. If so, any share count info on the front page might be as of some point next week (unless they change to showing only quarter-end figures). Delaying a week while buyback prices are well below IV before revealing their hand could provide a modest but worthwhile boost to IV per share if the 10-Q happens to reveal that something close to 25% of recent volume had Berkshire Hathaway as the buyer and that news were to provide a significant boost to the stock price.

IceCreamMan

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #176 on: November 02, 2018, 08:21:38 AM »
October 30, 2018
OMAHA, Neb. (AP) — Investor Warren Buffett’s company plans to release its third-quarter earnings report on Saturday morning.

https://www.apnews.com/10844de9ade74149912d3d6b46292aef

Dynamic

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #177 on: November 02, 2018, 08:25:03 AM »
Ah, thanks, IceCreamMan. (I'll have a '99' with an extra Flake please  :P - a little quip for my fellow Brits)

I'm surprised AP News releases didn't show up last time I checked BRK.B on Google or Yahoo! Finance

nickenumbers

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #178 on: November 02, 2018, 10:09:38 AM »
How does the SEC corporate buyback blackout period work relative to BRK in the situation.  Would BRK not be able to buyback it's own shares from 9/15/2018 thru 11/2/18 earning release date?

I like SwedishValue's math a couple posts back regarding how much of the monthly trading volume BRK could be buying back theoretically, but I am wondering if we need to modify it a bit for the buyback blackout.

PS- I don't know much about this particular nuance, and I am trying to learn.
The fastest Cheetah still waits for the lame baby antelope.  ..patience..

Dynamic

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #179 on: November 02, 2018, 10:15:38 AM »
I'm not sure if the Safe Harbor rules, when trading is conducted using predefined criteria through a single broker would exempt the company from having to cease buybacks during the blackout period. I've not read anything that make that very clear.