Warren Buffett sees a bargain
Berkshire Hathaway announces share buyback more than a year after it was authorized by the board.
On Sept. 26, 2011, Berkshire's board authorized the repurchase of Class A and Class B shares under two conditions: if the prices were not higher than a 10% premium over the company's book value per share and if the purchase did not reduce the company's cash holdings to below $20 billion.
At the time of the authorization, the company said, "In the opinion of our Board and management, the underlying businesses of Berkshire are worth considerably more than this amount, though any such estimate is necessarily imprecise." The amount repurchased would depend on its cash balance, the attractiveness of other investment and business opportunities, and how much the managers believed the shares were discounted compared to intrinsic value.
The board authorized the actual repurchase at $131,000, "coincident with raising the price limit for repurchases to 120% of book value."
The latest reported book value in the third quarter was $114,590 per share. The company could not repurchase at the current price under the former authorization, as a 10% premium would be $126,049. The 120% maximum would allow share repurchases up to a price of $137,508.
More share repurchases may follow, though the company disclosed no specific plans. There is currently no time limit on the authorization. "Berkshire may purchase additional shares in the market or through direct offerings at no more than 120% of book value," it said.
Berkshire shares had increased 14% from the beginning of the year through Dec. 11. They jumped another 3% on news of the buyback to trade at $134,564.
Over the last five years, however, Berkshire shares have declined 9%. Meanwhile, revenue per share has increased at an annual rate of 5.2%, free cash flow at 19.3% and book value at 8.1%. The company has about $82.4 billion in cash on its balance sheet, up from $68.6 billion a year ago, and no debt. (You can see its 10-year financial page on GuruFocus here).
Berkshire has a price-to-earnings ratio (P/E) of 16.3, price-to-book ratio (P/B) of 1.2 and price-to-sales ratio (P/S) of 1.4.
Buffett has previously said that CEOs should repurchase only when shares fall below intrinsic value. Based on his former comments in his shareholder letter, the buyback indicates he believes his shares currently trade at a discount:
Continuing shareholders are hurt unless shares are purchased below intrinsic value. The first law of capital allocation - whether the money is slated for acquisitions or share repurchases - is that what is smart at one price is dumb at another.
Charlie and I have mixed emotions when Berkshire shares sell well below intrinsic value. We like making money for continuing shareholders, and there is no surer way to do that than by buying an asset - our own stock - that we know to be worth at least x for less than that - for .9x, .8x or even lower. (As one of our directors says, it's like shooting fish in a barrel, after the barrel has been drained and the fish have quit flopping.)
I guess I really DON'T WANT the Rich giving to CHARITY either, goes against the grain...
NEBRASKA>>>>>STOPPED THE PIPELINE, because of the Ogallah(sp) Aquaifer(sp)
Other tree huggers are against it also....Obama said he would take up the process after elections.
We have plenty of pipelines...We just need a more direct route from the North to the South..
Probably Warren's railroad, BNSF is somewhat beneficial, so are others...
No big deal, that's been going on for DECADES. NOT something NEW and EARTHSHAKING.
TOG, ......Buffett is a Capitalist that supports a Liberal Socialist President's Tax Agenda. He misled the ignorant public when stating his secretary pays more in taxes than he does.....He pays taxes on Capital Gains, she pays Payroll Taxes.....apples and oranges.
These ultra-wealthy are happy to give to charity for the tax deduction otherwise most would not give a dime.
The apparent fact is Buffett helped Obama who in turn stopped the Keystone Pipeline which benefited Warren's Railroads. They are both responsible for preventing thousands of American Jobs.....borderline crony capitalism at best.
Crazed....Liberal Socialist Pig?....Buffet is the epitome(sp) of Capitalism...
Think he is just making peace with his Giver...
You do realize he is giving about 85-90% of his fortune away to charity, after his death...?
Not all to his kids....Which are plenty well off.....His one daughter is a philantropist.
And gives much of his personal money away every year to greatful causes.
You`ll never go wrong with Warren.I don`t care if he`s 82 or 102.His track rcord speaks
I still think Sam Snead was and always will be the best and greatest golfer ever. Sam won about twice as many touraments as the next winner (Jack Nicholas).
Sam the best, and Ben Hogan the next best. All the others are ay down the line
Maybe the IRS should seize less of my income are start taking his wealth - then we'll see what Warren thinks about redistribution
People, people, people...
I'm not a democrat or a republican (don't care for either) but I am a pragmatist.
I don't understand why so many of you middle class and some lower class people are in favor of the rich keeping their money and continuing to amass wealth of enormous proportions. Are you expecting them to share this money with you. Not likely. They are more likely to take that last $10 you have in your pocket. A good number of these people amassed these fortunes by using not so moral or ethical tactics. I'm not talking about small business owners or doctors, entrepreneurs or such, I'm talking about the extremely rich who make tens and hundreds of millions of dollars a year. The ones who truly run this country. These people make their money primarily off of investments and closing deduction loopholes or raising tax brackets is not going to affect them. They will still pay only 15% tax because they have cleverly made sure that capital gains is only taxed at 15%. Did you notice nobody is saying lets raise the capital gains tax on anyone making more than 1 million from investments.
No mater what deal the Dems and Reps come up with in reducing the deficit, mark my words, the super rich will not be a part of it.
He's been rich for a long time, he only wants the rich to pay more taxes, he would still be rich if the Banks were not bailed out. He pays his taxes, he has willed the majority of his wealth to charity,
i would really like to be in that kind of deep doo doo.
Apparently most of the people commenting are ignorant of the facts, but do not let that ignorance prevent them from advertizing said ignorance for all to see.
I'd be OK with anybody discussing the article at hand, and not some other BS about Buffett's taxes or politics. Just sayin'.
Let me explain to the leprechaun - a board of directors has only a few (legal) choices to make when it comes to dealing with cash left after operating expenses. They can use it to reinvest in the business, buy other businesses, or distribute dividends. BRK has never paid a dividend. Historically, BRK share holders would do well to let Buffett reinvest the money. Right now, he is saying one of the best bargains out there is BRK iteself. In buying back shares, the value of stock goes up for people who continue to hold.
qutie the paradox ain't it?? the left hate people like this, and yet he can do no wrong, he also didn't pay taxes in 12yrs, oh but that's glossed over since he insists that he should be taxed more, cuz he isn't taxed enough, how insanely stupid is this old fool??? Romney and buffet are extreeeeeeeeeeeeeeemly wealthy and Romney is hated, but pays his taxes and gave 7million dollars to various charities, buffet admired?? huh??, never gave anywhere near 7mil to charities and a tax cheater, plus he's a pathetic old obamazombie.
only the mind of the insane left does that make any sense, in looney lefty land the insane makes perfect sense, oh and looks like the union thug filth in MIchigan fell down and went BOOM! bout time those lowlife's got what they deserved, hopefully know Michigan has a chance to revive itself to prosperity even with that pig marxist muslim bastard osama in office
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The company is planning a 10-for-1 split, which will cut its share price dramatically.
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