Subject: Re: Does WB require 10% off on stock repurchases? N
The 'conservatively calculated' is where the big question mark is: How does he do this calculation, and how conservative is it?

To Echo Jim's point, he actually laid it out pretty clearly in the 2003 AGM.


AUDIENCE MEMBER: Right. My question pertains to the allocation of a company’s free cash. And the question is, under what circumstances would Berkshire consider parting with its money for a share buyback program, as opposed to retaining it for future acquisitions? Thank you.



Our preference — and we stated this 20 years ago, even to — is to buy businesses. We are — we want to add businesses of a quality with managers of a quality equal to those we already own, at prices that make sense. And that’s our number one preference.

If we thought Berkshire was significantly undervalued and we thought the likelihood of using the money to buy businesses — the probability was low — we would be buying stock in — we probably wouldn’t be able to buy a lot of stock in, but we would only buy stock in if we thought the stock was selling significantly below intrinsic value.

And there’s no magic figure for intrinsic value. Intrinsic value is a range. Charlie would name a different number than I would name, but our ranges would be quite similar, if we were to write them down on a piece of paper now. But they wouldn’t be identical.

So we leave a — we would leave a significant margin of safety and would want to buy at a — what would be a clear-cut, to us, discount from the lower levels of intrinsic value we might calculate.