Sep 032018
 

In a Berkshire Hathaway news release on July 17, 2018, Berkshire’s Board of Directors announced an amendment to its share repurchase program.  The earlier share repurchase program provided that the price paid for repurchases would not exceed a 20% premium over the then-current book value of such shares.  Under the amended plan, share repurchases can be made at any time that both Warren Buffett and Charlie Munger believe that the repurchase price is below Berkshire’s intrinsic value, “conservatively determined”.

“The current policy whereby share repurchases will not be made if they would reduce the value of Berkshire’s consolidated cash, cash equivalents and U.S. treasury Bills holdings below $20 billion will continue.  Berkshire will not initiate any share share repurchases under the amended program until it publicly releases its second quarter earnings, currently scheduled after the close of the markets on Friday, August 3, 2018.”

On August 30, during an interview on CNBC, Warren Buffett stated that “we’ve bought back a little” (shares of Berkshire Hathaway).  Therefore, these shares were purchased between Monday, August 6 and Thursday, August 30 (Buffett: “We’re buying stocks this morning.”)  Between August 6 and August 30, Berkshire Hathaway traded approximately between $310,000 and $315,000 per share (approximately a 45% premium to its June 30 book value of $217,677).  A purchase price in this range implies that Buffett and Munger probably estimate that Berkshire’s intrinsic value is at least a 55% premium to its book value, or at least $335,000 per share, allowing for a “margin of safety”.  On Friday, August 31, Berkshire closed at $315,800.

 

 Posted by at 8:12 pm

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