Monday, September 26, 2011

Buffett Buys Back Stock.

This is one of the most exciting things that I have seen, and, I am not even a shareholder of Berkshire! I am getting ready to dismiss what the crowds say, when they start chiming something to the effect of "Warren Buffett is a hypocrite... he once said that he wouldn't buyback shares due to it being unfair treatment of BRK shareholders!"

Yeah, whatever...

Anyway, this repurchase plan is exactly the kind that I would institute: indefinite, and with no cap as to the amount that can be repurchased. It is nimble and from the wording of the press release, Berkshire (surprise surprise!) actually cares about how the capital is deployed- as in, they care if Berkshire is a better investment than, say, buying some company in India or even additional shares of Johnson & Johnson.

As I have long said, repurchases, just like issuance of stock for an acquisition, is all about what you pay (or give) versus what you get in return. In this case, BRK is obviously going to be getting more in intrinsic value than it pays out of it's hoard of cash.

Does this make me want to go long BRK stock? Well, I am a lot more inclined to now than I was yesterday, however, the ultimate answer is no. Simply put, while Berkshire is seemingly almost always undervalued for the past few years, I keep finding better opportunities. Plus, when it comes to growing earnings, book value, and a host of other metrics that value guys look for, Buffet and Berkshire have constraints due to the large cash hoard that they have. I, and every single company that I invest in, don't have that, yet, they are on sale significantly more than Berkshire is.

That said, if I had a few billion dollars under management, I would probably have already thrown a good deal of money at BRK.

Disclosure: None. This is not advice or a recommendation of any kind.

No comments: