Berkshire buyback--at 120% of book

[netnet]

Berkshire has bought back 9,200 of A shares from the estate of a shareholder.  The board has authorized purchases at 120% of book.

 

So that (presumably) sets the new floor at 120% of book. At a cost of 1.2 billion, this buyback is a fraction of cash flow.  (And with the prospect of capital gains going away, could there be more?  This is one of the few companies in America that could instantly buy back 10 billion worth of shares from aging billionaires between now and January 1st, without so much as a pause between bites of a Dilly bar. )

 

 

Netnet

[berkshiremystery]

Here's an interesting article on the buyback

 

Buffett's Leading The Corporate Buyback Surge

2912-12-18

http://www.forbes.com/sites/investor/2012/12/18/buffetts-leading-the-corporate-buyback-surge/?partner=yahootix

 

[Palantir]

We're getting close....anyone putting limit orders at 89.25 ish?

[Guest rimm_never_sleeps]

We're getting close....anyone putting limit orders at 89.25 ish?

 

the buyback is no put. it's not a guarantee that it stays at his buyback price. I don't know why people keep calling it that. if we had a market event next week that took s n p down 20% brk would go down 15%.

[bmichaud]

We're getting close....anyone putting limit orders at 89.25 ish?

 

the buyback is no put. it's not a guarantee that it stays at his buyback price. I don't know why people keep calling it that. if we had a market event next week that took s n p down 20% brk would go down 15%.

 

Come on Burke, it's the easiest trade in the world!  ;D

[Guest rimm_never_sleeps]

We're getting close....anyone putting limit orders at 89.25 ish?

 

the buyback is no put. it's not a guarantee that it stays at his buyback price. I don't know why people keep calling it that. if we had a market event next week that took s n p down 20% brk would go down 15%.

 

Come on Burke, it's the easiest trade in the world!  ;D

 

I don't understand it. not the first time. cheers!

[bmichaud]

We're getting close....anyone putting limit orders at 89.25 ish?

 

the buyback is no put. it's not a guarantee that it stays at his buyback price. I don't know why people keep calling it that. if we had a market event next week that took s n p down 20% brk would go down 15%.

 

Come on Burke, it's the easiest trade in the world!  ;D

 

I don't understand it. not the first time. cheers!

 

 

Of course you don't......

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-mother-of-all-trades/10/

[Guest rimm_never_sleeps]

maybe you can explain it to me. I don't understand the trade. serious. don't understand how it's a can't miss.

[bmichaud]

I was agreeing with you! I was mocking the ludicrousness of believing BRK's buyback will somehow act as a put in a large market decline.

 

Sorry for the confusion - sarcasm sometimes doesn't come across on a message board.

[Guest rimm_never_sleeps]

I was agreeing with you! I was mocking the ludicrousness of believing BRK's buyback will somehow act as a put in a large market decline.

 

Sorry for the confusion - sarcasm sometimes doesn't come across on a message board.

 

ok. good. at least there are 2 of us. :)

[Grenville]

Thought this was interesting.

 

Ronald Olson bought 2,500 BRK-Bs

 

http://www.sec.gov/Archives/edgar/data/1067983/000118143112066401/xslF345X03/rrd364227.xml

[twacowfca]

Thought this was interesting.

 

Ronald Olson bought 2,500 BRK-Bs

 

http://www.sec.gov/Archives/edgar/data/1067983/000118143112066401/xslF345X03/rrd364227.xml

 

He has been a buyer in recent months at various levels a hair above the then repurchase prices.  :)

[twacowfca]

I was agreeing with you! I was mocking the ludicrousness of believing BRK's buyback will somehow act as a put in a large market decline.

 

Sorry for the confusion - sarcasm sometimes doesn't come across on a message board.

 

ok. good. at least there are 2 of us. :)

 

You are correct.  This is not an absolute put or one that is legally binding.  But, with a low turnover stock, a loyal shareholder base and and perhaps nearly $20B in available cash, with Warren's strong intent, this is about as good a low risk trade as it gets.  :)

[jay21]

I agree.  You don't need to believe its a "put" for it to be exploitable.  You just need to believe that it is a sticky point/resistance etc.  that skews the probability that it will fall below that price.

[Guest rimm_never_sleeps]

the problem is that in a market decline he usually finds something else to do with his $20b.  I think it's a signal that it's okay to buy at these prices. He has blessed it. I don't see it as support of the shares.

[Guest rimm_never_sleeps]

I agree.  You don't need to believe its a "put" for it to be exploitable.  You just need to believe that it is a sticky point/resistance etc.  that skews the probability that it will fall below that price.

 

and how is it a "sticky" point? could you not say the same thing about John Malone? yet his stock falls way below prices he paid to buy back stock. review history of LINTA. the market is going to do what it will do. there is no stickiness.  if the market has a panic, do really think anyone is going to stop and think about not selling because Buffett bought .5% of the stock back?

 

I am not predicting this trade won't work out. It may work. It probably will work. because I don't see the market going down much in the next few months. but I really think it's being sold as something it's not.

[alwaysinvert]

I agree.  You don't need to believe its a "put" for it to be exploitable.  You just need to believe that it is a sticky point/resistance etc.  that skews the probability that it will fall below that price.

 

and how is it a "sticky" point? could you not say the same thing about John Malone? yet his stock falls way below prices he paid to buy back stock. review history of LINTA. the market is going to do what it will do. there is no stickiness.  I am not predicting this trade won't work out. It may work. It probably will work. because I don't see the market going down much in the next few months. but I really think it's being sold as something it's not.

BRK has always been more resistant than the general market in downturns? Also, even if you don't agree with the sticky point argument, which I happen to do, it still would provide an excellent buyback opportunity if the stock tanked, one which Buffett would be able to use opportunistically. It's not gone that badly for Malone either. It's basically a win-win proposition to buy at these prices if your time frame is long enough. Either we won't have the downside in the stock or we will get buybacks at low prices or we will get aqcuisitions at prices even more attractive than depressed BRK stock.

[Guest rimm_never_sleeps]

 

It's basically a win-win proposition to buy at these prices if your time frame is long enough. Either we won't have the downside in the stock or we will get buybacks at low prices or we will get aqcuisitions at prices even more attractive than depressed BRK stock.

 

that's always been true of brk. I think it's a given that he creates value when markets go down. I am not arguing he won't. btw, in your scenario, you get put the stock. I have sold puts on brk before. I just didn't do it during a strong rally. I think lots of value investors hide in brk when they run out of ideas. those guys are not thick through thin investors imo.

[Palantir]

I don't think it's a "put", but merely a giant "BUY" signal. You're buying the same stock at the same price WEB would pay. How often does that happen?

[vinod1]

You're buying the same stock at the same price WEB would pay. How often does that happen?

 

Over the past 5 years: WFC, BNI, JNJ, USG, KFT, WMT, arguably even BAC at its lows. :)

 

Vinod

[Palantir]

You're buying the same stock at the same price WEB would pay. How often does that happen?

 

Over the past 5 years: WFC, BNI, JNJ, USG, KFT, WMT, arguably even BAC at its lows. :)

 

Vinod

 

Yeah, but were you able to buy those before he did? Point is, he's telling the world, "I'm going to buy this stock at this price because its really really cheap", he didn't do that with BNI or JNJ or WFC.

[twacowfca]

You're buying the same stock at the same price WEB would pay. How often does that happen?

 

Over the past 5 years: WFC, BNI, JNJ, USG, KFT, WMT, arguably even BAC at its lows. :)

 

Vinod

 

Yup, the surest way to have made money has been to have bought a company when Warren first bought a lot of their stock.  :)

[vinod1]

You're buying the same stock at the same price WEB would pay. How often does that happen?

 

Over the past 5 years: WFC, BNI, JNJ, USG, KFT, WMT, arguably even BAC at its lows. :)

 

Vinod

 

Yeah, but were you able to buy those before he did? Point is, he's telling the world, "I'm going to buy this stock at this price because its really really cheap", he didn't do that with BNI or JNJ or WFC.

 

He did tell the world that those stocks are cheap by buying aggressively and these stocks are available at lower prices after these purchases were reported.

 

Vinod

[jay21]

I agree.  You don't need to believe its a "put" for it to be exploitable.  You just need to believe that it is a sticky point/resistance etc.  that skews the probability that it will fall below that price.

 

and how is it a "sticky" point? could you not say the same thing about John Malone? yet his stock falls way below prices he paid to buy back stock. review history of LINTA. the market is going to do what it will do. there is no stickiness.  if the market has a panic, do really think anyone is going to stop and think about not selling because Buffett bought .5% of the stock back?

 

I am not predicting this trade won't work out. It may work. It probably will work. because I don't see the market going down much in the next few months. but I really think it's being sold as something it's not.

 

I didn't say it was sticky point.  You would need to analyze the situation and determine that for yourself.  One thing I think the people who think it is a resistance level look at is the fact it was trading below 1.2 BV previous to the announcement and not really after the announcement.

[twacowfca]

I agree.  You don't need to believe its a "put" for it to be exploitable.  You just need to believe that it is a sticky point/resistance etc.  that skews the probability that it will fall below that price.

 

and how is it a "sticky" point? could you not say the same thing about John Malone? yet his stock falls way below prices he paid to buy back stock. review history of LINTA. the market is going to do what it will do. there is no stickiness.  if the market has a panic, do really think anyone is going to stop and think about not selling because Buffett bought .5% of the stock back?

 

I am not predicting this trade won't work out. It may work. It probably will work. because I don't see the market going down much in the next few months. but I really think it's being sold as something it's not.

 

I didn't say it was sticky point.  You would need to analyze the situation and determine that for yourself.  One thing I think the people who think it is a resistance level look at is the fact it was trading below 1.2 BV previous to the announcement and not really after the announcement.

 

 

Well, Duh.  Resistance.  Schmugrinstance. 

 

Is there any other company in the universe that could offer to buy back its stock immediately on the open market at a 10% premium to the market price and only be able to buy back less than 1/10 of 1% of the shares, even after raising the buyback price repeatedly over the increasingly higher market price of the stock over the next year?