Author Topic: Buffett buybacks: Could Berkshire tender stock?  (Read 189606 times)

longinvestor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #460 on: November 04, 2019, 10:14:17 AM »
There was a mention here as well as elsewhere that “If Buffett doesn’t buy at these prices, why should we?”. It’s a fair question after all for this community of value investors but an enormously important one for Omaha. They must hope that most market participants keep this sentiment and don’t buy, for as long as possible. Besides large single block purchases, the stock selling below IV is needed. Sentiment driven versus fundamentals. Mungofitch over at TMF points out that per share earnings grew 13.5% yoy. That’s with only 75% of the engine working. We’re in a good place, cash pile be da$@ed.


longinvestor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #461 on: November 05, 2019, 10:19:25 AM »
With the stock price bonhomie underway, what would be of most interest is if buy backs are continuing, even in dribs as has happened. We will find out in Feb, 2020, won't we?

 
« Last Edit: November 05, 2019, 10:24:10 AM by longinvestor »

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #462 on: November 05, 2019, 10:56:34 AM »
There was a mention here as well as elsewhere that “If Buffett doesn’t buy at these prices, why should we?”. It’s a fair question after all for this community of value investors but an enormously important one for Omaha. They must hope that most market participants keep this sentiment and don’t buy, for as long as possible. Besides large single block purchases, the stock selling below IV is needed. Sentiment driven versus fundamentals. Mungofitch over at TMF points out that per share earnings grew 13.5% yoy. That’s with only 75% of the engine working. We’re in a good place, cash pile be da$@ed.

Thanks, longinvestor,
  • We [still] don't know what's going on on Mr. Buffett's working desk [actually, as I understand the situation : The desk of the father of Mr. Buffett], day by day [and we never will]. Personally, I'm a firm believer [religious or not? - the reader of this post is to decide] that he isen't spending his time power-napping on a couch in his office.
  • CAPEX spent in the first 9 months in companies already owned by Berkshire : USD 11.193  B, up from same period P/Y : B 10.040 B. The work by among others Mr. Abel - Investing in the future of Berkshire. These investments are investments where internal hurdle rates are met, not purchases of new brushes to toilets, toilet paper or what do I know.
- - - o 0 o - - -

And even what appears miniscule buybacks add up over time, yes.
« Last Edit: November 05, 2019, 11:22:21 AM by John Hjorth »
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valueinvesting101

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #463 on: February 17, 2020, 09:41:16 AM »
Just read this transcript from 1996 AGM:

30. Berkshire businesses worth more than book value
WARREN BUFFETT: Zone 6.

AUDIENCE MEMBER: Mr. Buffett, my name is Steven Tuchner. I’m a shareholder from Toronto,
Canada. And my question concerns the valuation of Berkshire shares.
Given the large number and dollar size of the private businesses recorded at historic cost, which
Berkshire owns, shouldn’t the multiple to book that the stock trades at, essentially, expand over
time to reflect the increases in intrinsic value of the private holdings?

And I cite Buffalo News on the books at, essentially, I think around zero. And even GEICO now
will be on the books at, probably, between 3 and 4 billion — worth more than that — as
examples of the disparity between intrinsic value and book value?

WARREN BUFFETT: Most of the businesses that we own all of, or at least 80 percent of, are
carried on the books at considerably less than they’re now worth.

And with some of them, it’s dramatic, although it’s not dramatic compared to a $40 billion total
market valuation for Berkshire. It’s dramatic relative to the carrying price.

Because when we bought See’s Candy for an effective $25 million in 1972, it was earning 4
million, pretax. It earned over 50 million, pretax, last year. When we bought the Buffalo News,
it was making nothing. Paid 30 and a fraction million. And it’s now earning, maybe, 45 million.
And we’ve got a number of businesses. And GEICO’s worth more than we carry it for because of
the accounting peculiarities of the first 50 percent.

So, it is true that, overwhelmingly, our businesses are worth something more than intrinsic
value — than book value — and, in many cases, very substantially more, although that’s
reflected in the market price of our stock.

I don’t think you can go from year to year and trace the intrinsic value precisely by changes in
book value. We use changes in book value as a very rough guide as to movement, and
sometimes I comment.

There have been certain annual reports where I’ve said our intrinsic values grew more than the
proportional change in book value, and there’s been others where I’ve said I thought it was
roughly the same.

So, I don’t think you can use it as a — stick some multiplier on it and come up with a precise
guide — a precise number. But I do think it’s a guide to movement.


Our insurance business, though, is the most dramatic case of dollar difference between book
value and intrinsic value.
I mean, the number has gotten very big over time there. I personally
think it will tend to get bigger, because I think GEICO will grow, and I think our other businesses
will do well.

The trick, of course, is to take the new capital as it comes along — and not from the issuance of
the B, because that’s relatively small compared to the amount of capital we will just generate
from operations.

Our float will grow from year to year. Our earnings will be retained. And we’ve got to go out
and find things to do that three or five years from now that people say, “Well, that’s worth
more than the book value.” And that’s a job. It’s a tougher job than it was. But it’s kind of fun.

alwaysinvert

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #464 on: February 22, 2020, 07:54:02 AM »
$2.2b for the quarter. Adjusted for share issuance in Q4 but not in Q1 thus far (as we don't know those numbers), there should be additional repurchases for just shy of $400m up to Feb 13.

Top price paid in Q4 per B of ~226 and probably a bit higher than that in Q1.

The hotline number for selling back shares takes a proper tender offer off the table for at least the next couple of years imo. But maybe you can frame this as a form of "sneaky" tender offer which could potentially give extra large volumes from institutional owners if we ever see significant outflows from the market again. It will be interesting to hear if he touts this offer on CNBC on Monday, as the awareness of it from the letter alone may not be enough.  A dividend will definitely not happen either before this method of buyback has been tested.

Anyhow, it is finally something of an admission that the market just will not acommodate large enough volumes for repurchases, at least not until enough of Buffett's shares get out there.

CassiusKing1

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #465 on: February 22, 2020, 09:19:40 AM »
Could WEB's donated shares to the Gates Foundation be "tendered" back to Berkshire Hathaway?

alwaysinvert

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #466 on: February 22, 2020, 10:05:55 AM »
Could WEB's donated shares to the Gates Foundation be "tendered" back to Berkshire Hathaway?

It surely would be a logical solution for Berkshire to directly take the 5 million Bs they sell into the market every quarter. But this has been discussed quite a bit and appearances may make it less than ideal. Also, why wouldn't they have made the arrangements for that already then? Maybe it can now more easily be done as part of a larger policy of buying back on demand outside the market.

longinvestor

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #467 on: February 22, 2020, 10:59:16 AM »
Could WEB's donated shares to the Gates Foundation be "tendered" back to Berkshire Hathaway?

I thought he elaborated in the letter that he has instructed his estate’s trustees to keep it “all in Berkshire shares” to the moment of disbursements. Even with the small  possibility that this may not work out as well as he’s hoping it will.

Mephistopheles

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #468 on: February 22, 2020, 11:54:41 AM »
Could WEB's donated shares to the Gates Foundation be "tendered" back to Berkshire Hathaway?

I thought he elaborated in the letter that he has instructed his estate’s trustees to keep it “all in Berkshire shares” to the moment of disbursements. Even with the small  possibility that this may not work out as well as he’s hoping it will.

Well the Gates foundation has to sell the donated shares within a year or two after receiving.

The instruction for his estate is for his personal shares that he owns, not the ones that are already donated. He has instructed the estate to hold on to all the shares and donate them per the schedule over the 10-15 years after he dies and to not sell the shares.

John Hjorth

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Re: Buffett buybacks: Could Berkshire tender stock?
« Reply #469 on: February 24, 2020, 11:44:07 AM »
Carrying some posts and quotes recently from another topic in the Berkshire Forum, to this topic :

I don't think it's comfortably below. If it was comfortably below then they would be buying ooodles of stock but they're not. They weren't buying ooodles around the 200 level either.  So I'd say that they're probably not overly excited the discount.

This would be a foolproof argument if they *could* easily buy oodles of stock over the market. But they can't. I'm not saying that he thinks it's at 50% of IV, but probably - at most - something like 80%. There is room to be somewhat more aggressive with bids over the market, but likely not as much as people seem to believe. If suddenly buyback volumes in a quarter were ratcheted up 100% from these levels, the stock would take off, making further buybacks that much harder. There is both a volume problem and a serious front-running issue. Also, as Munger expresed recently, other opportunities are dwindling while cash is growing.

He has every incentive to undersell the fact that they were doing buybacks all the way up until Dec 31 and that's what the overall effect of the letter was, while still, oh-so-galantly, offering to relieve people of large blocks of stock. Just like he last did in the 1999 letter, mind you:

Quote
Recently, when the A shares fell below $45,000, we considered making repurchases. We decided, however, to
delay buying, if indeed we elect to do any, until shareholders have had the chance to review this report. If we do find
that repurchases make sense, we will only rarely place bids on the New York Stock Exchange (“NYSE”). Instead, we
will respond to offers made directly to us at or below the NYSE bid. If you wish to offer stock, have your broker call
Mark Millard at 402-346-1400. When a trade occurs, the broker can either record it in the “third market” or on the
NYSE. We will favor purchase of the B shares if they are selling at more than a 2% discount to the A. We will not
engage in transactions involving fewer than 10 shares of A or 50 shares of B.
Please be clear about one point: We will never make purchases with the intention of stemming a decline in
Berkshire’s price. Rather we will make them if and when we believe that they represent an attractive use of the
Company’s money. At best, repurchases are likely to have only a very minor effect on the future rate of gain in our
stock’s intrinsic value.
I'm sorry, but I'm with Viking on this one.

I don't buy the it's hard to buy stock argument. You have to keep in mind that this is Buffett we're talking about. He may be a geezer but he's probably one of the savviest stock traders that ever walked the face of the Earth. He didn't have a problem buying huge amounts of stock in ANY company if it meant making money. And we're not talking here just large companies like Coke and Apple. We're talking obscure shit like Sanford Map and other stuff. The man know how to buy stock if he wants to. But all of a sudden it's hard for him to buy stock in the 5th largest corporation in America? Nah man.

If he's not buying huge amounts of stock is because he doesn't want to, not because he can't or doesn't know how.

I guess Buffett is just completely full of shit here then: https://www.youtube.com/watch?v=EHYwBmUELbA

-Certainly an interesting discussion! [-and to me, more relevant in this topic][ : - ) ]
”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