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Greg stated on CNBC

Also personally bought $15m of A shares which equates to his after tax annually compensation. Even more impressive is that he intends to do this every year!

That’s leadership!

Also personally bought $15m of A shares which equates to his after tax annually compensation. Even more impressive is that he intends to do this every year!
...
That’s leadership!


Mmm, yeah. It's a vote of confidence. But also virtue signalling.

If the purchases are every year, they aren't going to be price sensitive. Any purchase that isn't price sensitive isn't really a statement of confidence in value prospects, it's for other reasons. Some of which are good and honourable, likely the case here. At other firms, I would give that stated purchase policy zero value in terms of my opinion of the firm or the stock.

Jim

Buybacks have begun

FWIW
Given the historical strong preference for A shares, the buybacks were on Wednesday when the market price range was $724750 to $733500.

That represents a range of 1.453 to 1.470 times freshly known book per share. So we know that their current cutoff above which they wouldn't buy, if there is one, is 1.47 or lower.

Speculations:
Since this is an unusually public and precise peek into their thinking, Wednesday's price range might be considered a bit of a floor by a lot of people. Same with that price/book ratio, to an extent.

The price can and will certainly drop lower during panicky days since it's such a big part of cap weighted indexes, but those dips probably won't last. Under normal circumstances it's unusual to have such a clear signal about fair value. When they announced the "1.2 times book" target a few years ago it almost never traded below that again.

No big surprise, price up $10k in pre market. Perhaps more surprising is merely seeing A shares trade hands at all in pre market : )

Jim

LOL at myself...so now I can do a silly dance, prancing around saying that for my great niece and nephew's trusts "I bought a couple days ago at $473 on the B's." "Whoopee!"

when actually I should be doing the walk of shame given the completely wimpish number of shares I got. As Jim says the floor is likely in for a while unless we get likely brief intermittent panic.

Has Berkshire ever signaled so precisely that they were buying back shares, basically while they were doing it? I don't remember anything like this happening before.

Greg claims they did this because of the transition, to provide clarity or something I think he said? It kind of sounds like he was trying to goose the price of the stock (or put a floor under it), which seems dumb if you really want to buy back more shares.

" Greg claims they did this because of the transition, to provide clarity or something I think he said? It kind of sounds like he was trying to goose the price of the stock (or put a floor under it), which seems dumb if you really want to buy back more shares.'


HEY, don't use that terminally around here unless you are willing to share the doghouse with me! :)

Mmm, yeah. It's a vote of confidence. But also virtue signalling.

I agree! If you really wanted to buy back lots of stock while it was undervalued, why would you announce you are buying back stock?

It sounds crazy to say this, but it's almost like he was upset the stock fell after his first letter as CEO, and wanted to boost it back up. That can't be the reason, hopefully.

I can see the virtue signaling aspect.

As someone who was critical of him selling out of BHE and not replacing the full amount into Berkshire, he still bought a very nice amount of Berkshire stock, I feel this new move signals to shareholders that he's with us and aligned, maybe he felt he had to do this because Warren is a tough act to follow.

Much like dollar cost averaging into an index fund, this is the same thing IMO, some purchases will be high, some will be low, all in he will average out a decent price and perform personally in line with the business.

Do we sell puts yet?

I agree! If you really wanted to buy back lots of stock while it was undervalued, why would you announce you are buying back stock?

An alternative view. BRK wants to maximise shareholder value AND they don't want to take unfair advantage of their partners (shareholders). As such, they buy when the stock is below IV, but they are letting their partners know that with their detailed knowledge they think the partners are selling below IV.

Aussi

Very interesting and helpful to have such a precise range to work with. I'm happy to think of something like 485/B as my new floor.

Greetings,

Full disclosure, I sold more than 90pct of my Berkshire last year at higher prices because of some of the same issues I still have today. It had been a large percentage of my stock portfolio since 2000.

I also believe this is one of the safest companies out there.

Here are my issues.

First, I believe that reinvestment of float and flows from the operating businesses is the biggest driver of the company going forward. Greg Abel has no experience in managing investment portofolios a tenth of the size of what is available today. Ted Weschler has decades of expereince managing portolios. Why not allow him to manage 50%? This is very strange to me.

Second, Geico, after a nice turnaround by Todd Combs, is now forced to invest significant dollars into advertising. Auto Insurance is an incredibly competitive field that has been overearning for quite some time now.

Third, Berkshire Energy is less valuable and more vulnerable than it was 5 years ago.

Fourth, Ajit is now 74. He has been working at Berkshire for 40 years. He sold half his shares in September 2024. The bench may be deep but first losing WB and everything he brings to the table (let's not forget many of the special deals he orchestrated during crises over the last thirty years)and likely Ajit in the not so distant future, doesn't make me more sanguine on the company.

There are many counterpoints of course. Rock solid balance sheet. BNSF. Some operating business turarounds. I just feel that buying shares at close to 1.5X book or in my estimation a very small discount to IV, is not a great use of capital. Its fine, but first I think it is paramount to put someone with a solid track record and vast expericne to allocate that 300B+ sitting on the balance sheet. Is Greg Abel that person? I don't know but I do know how important that question is to the future value of Berkshire.

To reiterate, buying shares here is fine but I don't feel like this is an opportunity to even slowly accumulate/back up the truck as I have felt many times in the past twenty five years.

What am I missing?

DQ

. . . the virtue signaling aspect. . .

As someone who was critical of him selling out of BHE and not replacing the full amount into Berkshire, he still bought a very nice amount of Berkshire stock,

And don’t forget, Abel (presumably) voluntarily wrote a nine-figure-personal-check to the IRS as part of that transaction. It seemed crazy to me at the time; a very expensive way to avoid even the appearance of stock-based-compensation.

I don't feel like this is an opportunity to even slowly accumulate/back up the truck as I have felt many times in the past twenty five years.

What am I missing?

In my amateurish view: Nothing, apart from regarding Abel managing this huge portfolio the fact that he still has Warren in the background - though unfortunately not forever.

The real test for Greg comes when the whole market finally (this year I think) is going where it belongs (down), when he (though still with Warren´s help) has the chance to let Berkshire really shine again by putting this cash mountain to work.

It seems to me we all have to stop thinking that WEB is the same Oracle of Omaha that he was in the past. He is 95 years old. He admits that he can't really read anything anymore because he is so old. (He used to read, what? 5 newspapers every morning?) Do any of you have 95 year old relatives? Would you want to get their advice on how to invest $370 billion of cash in a new strange world of AI influenced stocks and investments, in an already overvalued world?

Do any of you have 95 year old relatives? Would you want to get their advice on how to invest $370 billion of cash

No. But I would utterly love to get the advice of the then 94 years old guy I listened to at last years Annual meeting.

I'm glad to see the resumption of repurchases, if only to get an idea of Warren's estimate of IV. Now we get to see Greg's personal purchases as well. Greg's highest price paid yesterday was $733,300, or 1.47x Dec 31 BV (or maybe 1.45x today's BV if BV is growing 2.5% per quarter). If Berkshire bought at similar prices to Greg, then Berkshire paid as high as 1.45x today's BV. However, Warren has stated that he would not repurchase shares at a "mere" 5% discount to IV, so his IV estimate may be 1.45x BV/0.95, or 1.53x BV.

Based on yesterday's purchases and on Warren's statement that he wouldn't purchase above 0.95x IV, we can infer that Warren thinks that IV is 1.53x BV, or maybe a bit higher.

If the purchases are every year, they aren't going to be price sensitive.

Maybe he takes the "Added Principle" to the still-live but unlinked Berkshire Owner's Manual quite seriously:


AN ADDED PRINCIPLE

To the extent possible, we would like each Berkshire shareholder to record a gain or loss in market value during his period of ownership that is proportional to the gain or loss in per-share intrinsic value recorded by the company during that holding period. For this to come about, the relationship between the intrinsic value and the market price of a Berkshire share would need to remain constant, and by our preferences at 1-to-1. As that implies, we would rather see Berkshire's stock price at a fair level than a high level. Obviously, Charlie and I can't control Berkshire's price. But by our policies and communications, we can encourage informed, rational behavior by owners that, in turn, will tend to produce a stock price that is also rational. Our it's-as-bad-to-be- overvalued-as-to-be-undervalued approach may disappoint some shareholders. We believe, however, that it affords Berkshire the best prospect of attracting long-term investors who seek to profit from the progress of the company rather than from the investment mistakes of their partners.

It's pretty clear to me they took the unusual ( to say the least) step of announcing the buyback to keep a negative narrative from running away and getting out of control after Greg's first letter. Warren is pretty savvy about market movements and is very adept at trading his own account, even if he does not do that for BRK.

Warren and Charlie have both said that Greg has many talents Warren does not have that will be very useful to Berkshire. Being gregarious and articulate in the same way Warren was is not one of those talents, obviously.

The stock is undervalued recently, even if not wildly so or as undervalued as they would like it to be to really back up the truck with cash on repurchases. They would be volume constrained that way anyway, even if they waited for that to happen.

I think a bigger concern would be losing managerial talent to run their own public companies if the narrative on Greg got out of control. For instance, Brooks is killing it and I'm sure the CEO is well compensated...BUT...how does that compare to running a company like ONON, DECK or NKE with control over capital allocation as well?

There is lots of other managerial talent that might be poached if moral got low/down and opportunity kept calling. Many of the old line businesses are limping along, barely keeping pace with inflation. If you lose too many star players, that can gain momentum and be a difficult thing to fix.

"I'm glad to see the resumption of repurchases, if only to get an idea of Warren's estimate of IV."

I suspect that Berkshire made the unprecedented announcement that Berkshire repurchased stock on Wednesday to show that Warren believed that Berkshire was in good hands under Greg, and that in fact he believed the stock was undervalued. Berkshire's stock had fallen 5% on Monday after the annual report, and Warren and Greg wanted to show their faith in the company.

I would not be surprised to see Berkshire repurchase more stock, even perhaps at prices several percent above Wednesday's repurchases, which were made at 1.46x known BV to 1.47x known BV. In March, April and May 2024 Warren repurchased stock at prices from 1.56x known BV to 1.60x known BV. I won't hold my breath for 1.60x BV, but 1.52x or 1.53x known BV ($760K) would not surprise me.

With the unusual nature of this PR, tea leaf reading is in full effect. Coming on the heels of the annual letter, Greg simply wants to let the world know that nothing has changed in 2026. Or will.

The best thing I heard in the interview is that this was a one-time communication. As a longtime shareholder, don’t like Greg to get verbose with buybacks- when, how much, how long etc. Greg did say that there won’t be any further such communication.

If there’s anything close to being the secret sauce similar to Coke’s syrup, stock purchases at Berkshire are. It really hurts our pathway to deploy capital. Especially for Greg. Especially with buybacks. He’s got 100’s of billions to pull off. Keep the street guessing for as long as possible.

It sounds crazy to say this, but it's almost like he was upset the stock fell after his first letter as CEO, and wanted to boost it back up. That can't be the reason, hopefully

Actually the cynical me thinks this is exactly the reason, and I’m willing to give him a pass this once.

The coupling of the announcements (“I’ve put my whole salary in” and “We’re doing buybacks again” are too closely linked in time and theme to be anything but coupled. I don’t believe in coincidence, especially when they emanate from the same person within minutes [exaggeration] of each other.

That said, perhaps he thought it important to “make a statement” at the outset of his “administration” to make sure everybody - down to the lowliest and stupidest financial reporter - understands that the program is secure, the force continues, the ship continues apace, and …

Well, I ran out of cliches. Anyway, this is not on the level of Jack Welch manipulation; if it continues I will be terribly disappointed. This time, pfft.

" It sounds crazy to say this, but it's almost like he was upset the stock fell after his first letter as CEO, and wanted to boost it back up. That can't be the reason, hopefully

Actually the cynical me thinks this is exactly the reason, and I’m willing to give him a pass this once.

The coupling of the announcements (“I’ve put my whole salary in” and “We’re doing buybacks again” are too closely linked in time and theme to be anything but coupled. I don’t believe in coincidence, especially when they emanate from the same person within minutes [exaggeration] of each other."


Good morning, it's truly incredible how so many old timers can see things so differently. For me, it's very obvious Buffett is no longer sitting at the head of the table, BUT, he's still very much in control. In view of the circumstances and reality, Greg has to show respect and he did everything he could to restore confidence in brkb going forward.

Greg could have waited until yesterday to buy his shares, AFTER full disclosure. I'm surprised the lawyers signed off on his timing but what's a 300,000$$ edge when the numbers are so large. Does our new in-house lawyer do corporate or securities work, or both? IF he does securities work he gets a D on that decision.

" Berkshire Hathaway Inc.’s long-standing common stock repurchase policy permits us to repurchase shares of our Class A and Class B Common Stock at any time we believe the repurchase price is below our intrinsic value, conservatively determined. In the interest of transparency with our leadership transition, we are disclosing that we commenced repurchasing shares of our common stock under this policy on Wednesday, March 4, 2026.

Our repurchase policy does not obligate us to acquire any specific number of shares. Shares may be repurchased in open-market repurchases or in privately negotiated transactions, including pursuant to trading plans that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The timing and total amount of stock repurchases will depend on the market prices of our Class A and Class B common shares, market conditions, and other relevant factors. Repurchases may be suspended or discontinued at any time without prior notice. Berkshire does not undertake any obligation to update or revise any disclosures regarding our repurchases, including any suspension or termination of the repurchases, except as may be required by applicable law or regulation (including through the disclosure of repurchase activity in Berkshire’s periodic reports on Form 10-Q and Form 10-K)."


It seems to me it's very UNbrkish and very UNBuffett for Greg and brk to buy prior to the filings. PLUS, this greenlights direct buys from the Foundations, imo. :)

Uncle Warren reminds me of my ex, it takes a while but eventually he realizes I'm right! ::))

To go from WB, who did not give a damn what the stock price did on a day to day basis, to a new CEO who is apparantly very worried it, is pretty shocking to me.

Doesn't this show some serious insecurity on the part of Greg? That whole interview has my internal alarm bell clanging a bit, but maybe I'm just overly on edge from all the other $hit that's going on in the world currently.

" To go from WB, who did not give a damn what the stock price did on a day to day basis, to a new CEO who is apparantly very worried it, is pretty shocking to me."


With all due respect you are missing it bud. This has nothing to do with Gregs, insecurity, read the filing, again, more closely. Forget what Buffett said the past 60 years, watch what he DID on weakness. He responded to weakness in the common, due to lack of demand, on every shareholder friendly move.

Seriously bro, read the filing and don't blame Greg, Buffett is still very much in control, like it or not.

The coupling of the announcements (“I’ve put my whole salary in” and “We’re doing buybacks again” are too closely linked in time and theme to be anything but coupled.

In the interview he describes telling the board members and Warren about his plan (in the February board meeting), to invest his entire after tax earnings every year immediately after the 48 hour cooling off period.

My wife is very good at people. She thinks Greg’s action shows he is going to be an aggressive ceo and Greg is making a statement and setting a goal post for everyone to see, and that he’s going to make us a lot money.

I think the progression to retuning buybacks is simple.

Buffet stopped 5 quarters ago due to price.

Price fell within in range, post May announcement of new CEO.

Buffet waited for the transition change and sat on the sideline.

New CEO and price was within range, but Greg waited until all shareholders had the most current info from annual update to evaluate business.

Once that was accomplished and the price was still attractive Buybacks began.

Business as usual going forward.

I believe this has nothing to do with Greg reacting to stock selloff because of annual report update. It does have to do with stock sell off impacting price to IV relationship.

Will be interesting to see the amount of buybacks that will be done thru 3/30 at this P/B~1.47-1.5. Who knows but I’d speculate it would be no more than $2B before Q1 end? Any educated guesses on the amount of buybacks in Q1?

Just enough to satisfy the pledge….ie, tiny to minuscule.

The announcement popped the price and put cold water on the lower price opportunity.

Should have just quietly bought during the slight price decline and then announced after the fact…at the May gathering.

Sure, not as transparent as announcing your plans prior to executing, but come on, we’re all adults here playing with reality.

I would have sided with more ‘shrewdm’

m

Thanks, Value.

If Charlie were alive and he were the one being interviewed, his answer to all the speculation about what he meant in the annual letter and his interview with Becky, Joe and Andrew, it would be, "I meant what I said," or, I mean what I say."

I think the same can be said about Greg. For a longtime shareholder, who's watched countless interviews with Warren and Charile, attended annual meetings for Berkshire, Wesco and Thee Daily Journal, read many annual letters, books and watched or read speaches made by both Warren and Charlie, I think Greg is also a man who says what he means. As Charlie said, Greg will preserve the culture.

What am I missing?

In my amateurish view: Nothing, apart from regarding Abel managing this huge portfolio the fact that he still has Warren in the background - though unfortunately not forever.


One further issue is size. It is hard to see how a $1.1 trillion conglomerate dedicated to growing by shrewd acquisitions can prosper when there are only 220 companies with market caps over $100b, or 110 US companies, Berkshire’s usual hunting ground.

The fact that even the great Buffett appears to have been stymied by this situation makes it all the less likely that it will be solved by the new guy.

The only solution I can see is to reduce the size of the company. There is certainly a wonderful opportunity to do that when you have $373b in cash in the coffers - a Dutch auction for a third of the company would be a great start, and some additional stock portfolio sales and a commitment to keep buying more shares up to a price closer to intrinsic value (although still under) would allow for continuing the process.

But I am not holding my breath. The ongoing presence of Buffett himself and the other guardians of the culture mean that such a radical departure from Berkshire’s modus operandi has to be a long shot.

It is hard to see how a $1.1 trillion conglomerate dedicated to growing by shrewd acquisitions can prosper when there are only 220 companies with market caps over $100b, or 110 US companies, Berkshire’s usual hunting ground.

The fact that even the great Buffett appears to have been stymied by this situation makes it all the less likely that it will be solved by the new guy.

The only solution I can see is to reduce the size of the company.

At the risk of revealing my ignorance, wouldn't it be feasible to set up an intelligently designed array of subsidiary domains for the purpose of acquiring and managing sets of smaller companies? It seems to me that might effectively resolve the dilemma of having to meaningfully move the needle via giant acquisitions.

Tom

DTB gets at the elephant in the room, not many quality (moated),available to purchase, less than 10x ratio market cap to pretax and large enough to move the needle exist. Acquiring Mars (the food company not the planet) would be nice, for example, but probably will never happen, at least not in the next decade.

Berkshire has been doing a credible job expanding existing companies with add on acquisitions and also through logical capital investments in subsidiaries (BNSE trackage, tunnels, bridges to accommodate double stacked rail cars, for example). When we first bought B shares, my recollection there was 50 million a week of positive cash flow going to the Omaha coffers. It is now over 770 million per week according to ChatGPT and confirmed by Gemini.Eventually it will cross the billion dollars per week threshold.

In my humble estimation, after Warren has left the earthly scene, there will be thoughtful consideration by Abel, the division leaders and the board leading to a Danaher-like periodic spinning out of aligned divisions within Berkshire. It will lead to good outcomes for all concerned, including the shareholders as Berkshire faces the consequences of the law of large numbers.

Thoughts pro or con?

Uwharrie

It is hard to see how a $1.1 trillion conglomerate dedicated to growing by shrewd acquisitions can prosper when there are only 220 companies with market caps over $100b, or 110 US companies, Berkshire’s usual hunting ground.

It´s all about Warren´s/Charlie´s mantra "buy great companies at decent prices" (or similar; my bad memory), whether that be whole companies or shares thereof.

Yes, apparently since years Warren doesn´t see opportunities to really move the needle meaningfully for a company of Berkshire´s size --- not surprising in an environment of since so many years markets only rising and getting more expensive.

But I see it historically, always have to think on Warren´s "I feel like an oversexed guy on an Island", replaced later by "... in a whore house". Maybe somebody can help me out with the dates he said that. For me it means nothing is going up forever and reminds me on what always differentiated Warren from mere mortals: Infinite patience.

- 1950-1965 the S&P went up for a full 16 years
- 1966-1981 up and down, effectively nowhere for the next 16 years
- 1982-2000 up again in a straight line for another 18 years
- 2001-2013 was required, 13 years, to reach that level again and to continue to rise from thereon --- with big swings during those 13 years, opportunities to deploy mountains of cash
- 2013-2025 up again for 13 years in a nearly straight line
- ???

I see no reason why these secular cycles shouldn´t apply any longer***.

If they do still apply it´s likely that a secular bear cycle is coming (or as I suspect already started). Then Warren/Abel probably will have many years with opportunities to invest even that huge cash hoard in a way which will ensure Berkshire´s profitability for some more decades (though I am not sure whether that will still benefit me or only my heirs :)

It´s a longterm game and nobody is better in that than Warren - and hopefully his students at the HQ. I am therefore willing to be a little patient myself and to give them some more years instead of becoming impatient and saying "Goodbye" to Berkshire at maybe exactly the wrong point in time.

Please don´t take it personal, but that contrary to all those years before now even posters I respect the most are starting to doubt Berkshire (with very good arguments) I see as support for my perma-skeptic and doomsayer stance.

The stance that secular cycles still apply, that what I wrongly expected since years might(?) be coming indeed: A change of times, the next phase in the cycle, a secular bear market, in which as it was the case after 2000 and 2008 the indexes might go down 50% --- with Berkshire then the (because of it´s size) last time to really shine. If I am wrong: Still not the most shabby investment to be in Berkshire.

At the risk of revealing my ignorance, wouldn't it be feasible to set up an intelligently designed array of subsidiary domains for the purpose of acquiring and managing sets of smaller companies?

This is such a simple answer that … it was the first thing I thought of too. Clearly there’s something wrong with the idea, though what that obvious defect is escapes me.

I mean, who wouldn’t want to have two half-Berkshires and watch them grow into a 2XBerkshire in a couple decades? The idea shouldn’t be “We can’t consider that because it wouldn’t move the needle”, but “Is this capable of producing the kind of growth (consistent with other values) that a Berkshire shareholder has come to expect?”

Berkshire is already an unwieldy conglomerate, a random assortment of candy & furniture, insurance and truck stops, batteries and railroads; why is anything off the table? I note that GE and Westinghouse, to name two, were conglomerates of disparate industries for more than a century, and they survived pretty well until at last, they didn’t. (I hold no illusion that Berkshire will outlast the sun going super-nova.)

Do I have suggestions on how this might be structured, who would report to who, what should be done to bring it about? No clue. But I fear the paralysis seeming to affect the company may be a result of trying to hew too closely to an outdated concept, the “unitary executive”, you should pardon the expression.

Maybe it’s time for, well, not something different, but something “more the same”, but twice.

At the risk of revealing my ignorance, wouldn't it be feasible to set up an intelligently designed array of subsidiary domains for the purpose of acquiring and managing sets of smaller companies?
...
This is such a simple answer that … it was the first thing I thought of too. Clearly there’s something wrong with the idea, though what that obvious defect is escapes me.

There are two problems that I can spot.

First, this is now a very crowded field. There are many, many BDCs and PE folks trying to buy good cash flow generating firms of small/medium/biggish size. So much so that the average quality of listed small firms has fallen through the floor...there is no longer a pipeline of good ones. In short, the goods on offer aren't great and the prices are high.

And second, who would run such a thing? I'm sure a younger Mr Buffett could do a smashing job even in this overpriced market, but he is is short supply.

The better choice might arise if there is an opportunity, perhaps during a market disruption, to buy a business already running such a portfolio. The operating-subs division at White Mountains, something like that? (Not that I expect them to have financial difficulties, just an example of a firm that has added a few operating subs). Maybe one of the oxymoronic public private equity firms that runs into unsurprising trouble but has some decent actual firms inside it.

Jim

who wouldn’t want to have two half-Berkshires and watch them grow into a 2XBerkshire in a couple decades? The idea shouldn’t be “We can’t consider that because it wouldn’t move the needle”, but “Is this capable of producing the kind of growth (consistent with other values) that a Berkshire shareholder has come to expect?”

I was thinking more along the lines of several divisions. Perhaps geographically distributed around the globe, or organized by sector or some combination of the two. This would allow for the systematic acquisition of the kind of companies that allowed Berkshire to grow so rapidly in the past. The argument against acquiring smaller companies seems to fly in the face of that far more rapid earlier growth. Effectively doing something like this might also afford substantial diversification advantages.

Tom

The average quality of listed small firms has fallen through the floor.

Berkshire has always been relatively good at acquiring decent companies at reasonable prices. Its culture and reputation have made it a desirable destination for would-be acquisition targets. Granted that Warren and Charlie have personally inspired that happy circumstance, but Berkshire can't afford to bemoan their departure forever. At least for now there seems to be a strong commitment to sustaining a highly principled culture.

The better choice might arise if there is an opportunity, perhaps during a market disruption, to buy a business already running such a portfolio.

That would indeed be fine alternative, and something to keep an eye out for. But it needn't be the only way of diversifying going forward.

Tom

There are two problems that I can spot.

First, this is now a very crowded field. There are many, many BDCs and PE folks trying to buy good cash flow generating firms of small/medium/biggish size. So much so that the average quality of listed small firms has fallen through the floor...there is no longer a pipeline of good ones. In short, the goods on offer aren't great and the prices are high.

Sure, but Bloomberg tells me there are 19,000 privately held companies with revenues between $100 million and $500 million in the US alone. Somewhere in that 19,000, (or at least twice that if worldwide companies were included) there must be some overlooked gems,the kind that Buffett used to find - or which came to him because of reputation. Is it possible, is it even conceivable that there are none of those which might fit into a widely diversified collection of companies which keeps hands off local management, yet provides sufficient capital backstop for them to satisfy their needs?

Are none of those people retiring? That would seem odd that it happened with some regularity a few years ago and doesn’t happen at all now. Or is it that the “move the needle” target is so high that they are overlooked in today’s age? (I note that Nebraska Furniture Mart revenue was around $100 million when acquired in 1983. That’s roughly my $300m threshold, inflation adjusted.)

And second, who would run such a thing? I'm sure a younger Mr Buffett could do a smashing job even in this overpriced market, but he is is short supply.

That’s why they have “divisions” in large companies. GE had’em. Westinghouse had’em. Do that, or maybe make two Baby Berkshires (both report to Greg) or something. I realize I’m building layers, but sometimes you gotta do what you gotta do. Or else you’re just sitting there stacking up the Benjamins, good for today, mediocre for tomorrow.

I think the valuation of small companies is not so attractive now. Berkshire used to talk about "bolt-on" acquisitions, but they haven't since 2021. These might be of a similar size to what you're writing about. In the 2018 report they only released per-year totals for the previous three years, stating "we do not believe that these acquisitions are material, individually or in the aggregate to our Consolidated Financial Statements" Except Berkshire did mention a $2.5 Billion purchase of an insurer bolted on to National Indemnity.

I don't know to what extend most acquisitions were discussed when they happened but Buffett didn't cover them much in the Annual Report.
2016: $1.4 B total
2017: $2.7 B total
2018: A $2.5 billion purchase of Medical Liability Mutual Insurance Company, $1 B total among various.
2018 to 2021: "several smaller-sized business acquisitions"

I would think any acquisition smaller than $2 Billion since 2021 won't get mentioned by name.

Regarding Greg' purchases of BRK stock,

Mungofitch:
Mmm, yeah. It's a vote of confidence. But also virtue signalling.

Google's AI:
Rule 10b5-1 Plans: To avoid accusations of illegal insider trading, corporate executives often use Rule 10b5-1 plans, which set pre-scheduled, automated buying or selling. This allows them to trade while in possession of material non-public information without violating SEC rules.

Voluntary Disclosure & Legal Compliance: While not legally required to use a 10b5-1 plan for every purchase, Abel's commitment to buying shares immediately after the release of annual results suggests a structured approach that avoids trading during sensitive, closed windows.

The fact that Abel is highly constrained by law as to making sure he publicizes his share purchases and highly motivated to avoid prosecution by having it be by a mechanistic pre-announced plan, is it really fair to call this virtual signalling? Is there another way he could buy BRK stock that does less signalling, or at least signals less virtue?

R:)

Mungofitch:
Under normal circumstances it's unusual to have such a clear signal about fair value.

Any idea what their discount rate is for determining fair value? I'd love to know how much they think I'm going to make if I buy shares at this same price.

R:)

The fact that Abel is highly constrained by law as to making sure he publicizes his share purchases and highly motivated to avoid prosecution by having it be by a mechanistic pre-announced plan, is it really fair to call this virtual signalling? Is there another way he could buy BRK stock that does less signalling, or at least signals less virtue?

My point is merely making the distinction between an insider buying stock because they think it's a good deal at the current asking price (the way a lot of people interpret insider purchases), and those that are done more for the impression of support and confidence in the company they engender among observers: signalling.

This is unarguably the latter, since it was announced that the buying program won't be price sensitive. There is nothing wrong with that, and I expect the confidence is entirely genuine, but it shouldn't be interpreted in the first way as a buy signal. Particularly as the $15 million purchase, even if annual, is not exactly an "all in" wager for someone with a net worth probably not all that far from a billion.

You can do something entirely reasonable because of the optics, which is fine--we should just be aware of that, and not interpret it any other way.

Jim

Buffett sold lots of stocks and accumulated large pile of cash in the past 1-2 years. It seems to me the buyback was planed by Buffett to give Abel a boost as the new CEO.

Buffett sold lots of stocks and accumulated large pile of cash in the past 1-2 years. It seems to me the buyback was planed by Buffett to give Abel a boost as the new CEO.

Nah. I believe Mr Buffett. He commented that he's not so selfless that he'd do something just to make the next guy look good.

Why look for obscure reasons? Sell stuff when prices are high and risks are rising. Buy during low prices and panics. Doesn't seem complicated. Never rule out the obvious just for the sake of a good yarn.

As for the buybacks resuming...valuation levels are reasonable, unlike the last couple of years. That's why my net position is no longer short, and I think the Omaha team is smarter than I am. Why look for a conspiracy theory?

Jim

<<Why look for obscure reasons? Sell stuff when prices are high and risks are rising. Buy during low prices and panics. Doesn't seem complicated. Never rule out the obvious just for the sake of a good yarn.>>

No contradiction. But prepare for buyback and wait for the right time (when Abel takes over, it doesn't matter a few months or weeks late) is possible. Just a guess, no other reason.

Buffett sold lots of stocks and accumulated large pile of cash in the past 1-2 years. It seems to me the buyback was planed by Buffett to give Abel a boost as the new CEO.

Nah. Jim replies:

I believe Mr Buffett. He commented that he's not so selfless that he'd do something just to make the next guy look good.

Why look for obscure reasons? Sell stuff when prices are high and risks are rising. Buy during low prices and panics. Doesn't seem complicated. Never rule out the obvious just for the sake of a good yarn.

As for the buybacks resuming...valuation levels are reasonable, unlike the last couple of years. That's why my net position is no longer short, and I think the Omaha team is smarter than I am. Why look for a conspiracy theory?

I hope folks pay attention to Jim's comments.

It really isn't that complicated. BRK's price has gone through a boom cycle, seeking alternate safe investments, not that hard to track, and has now gone back to a somewhat reasonable price versus a conservative IV.

Why make it more complicated?

Do any of you have 95 year old relatives? Would you want to get their advice on how to invest $370 billion of cash in a new strange world of AI influenced stocks and investments, in an already overvalued world?

Turns out I ask my 95 year old relatives who are multi-billionaires for investing advice all the time! Its like riding a bicycle, they say.

As to the strange world of AI, it turns out its just like standing on your tippy toes at a parade anyway. Artificial toes, I guess.

R:)

<<Turns out I ask my 95 year old relatives who are multi-billionaires for investing advice all the time! Its like riding a bicycle, they say.>>

what you really need is to help manage their money

I haven't heard anyone mention an alternative good reason to announce: could it be that a block of A shares became available with Warren's departure, and were offered to BRK as a chunk? Abel just decided to announce it? Dunno, just spitballing here.

When folks espouse conspiracy theories, I remind them that the government can’t even conspire to fix potholes.

My point is merely making the distinction between an insider buying stock because they think it's a good deal at the current asking price (the way a lot of people interpret insider purchases), and those that are done more for the impression of support and confidence in the company they engender among observers: signalling.

Fair enough. I guess I believe that it would be illegal, or extremely ill-advised in terms of being sued, for the CEO of Berk to not publicize his purchases, and that, assuming Greg would just as soon secretly buy $15 million a year of BRK, he would be ill-advised to not behave exactly as he has behaved in terms of publicizing his purchases.

So his behavior is *consistent* with being a buy signal: he would have to behave this way sending a very visible signal whether he wanted to signal or not, even if he just wanted the stock.

But you are right, by itself it is not reliably a buy signal.

However, reminding the world that Berk repurchases its own stock if it wants to WHEN IT IS TRADING at or below IV, and then announcing it is now making purchases: now THAT is a a buy signal.

R:)

What am I missing?

I haven't seen anybody suggest this so I'd like to throw it against the wall and see if anybody salutes.

Could it be that the ratio of BRK's IV to Book has increased over the last few years? And that's what we'all are missing?

As evidence for this:

1) I remember probably a year or two ago it seems to me Mungofitch made some comments to the effect that some new tax reporting thing or another should have increased BRK's value vs Book to a higher ratio

2) If you have looked at the time-series for Price/Book over the last 25 years, as I have, you will see in the last year or three it seems to have risen to the high end of the range it usually covers, and not fallen from there as soon as it generally did in the past

3) BRK currently seems to rise in price when the rest of the market is weak and decline a bit in price when the rest of the market is strong. Even though its general level is relatively close to 1.6 Price/Book

and perhaps most importantly

4) The CEO of Berkshire recently stood there and told us: BRK is trading a bit below its IV right now.

To me, the biggest risk is that Greg is behaving in a way that Warren wouldn't really love, but that Warren is being a good ex-CEO and giving Greg as much leash as he may need to either do what he needs to do or to hang himself. But this whole transition process has been spread out over such a long time I have pretty good faith in it. I also have my own pet theory that BRK should go up in price as a new CEO leans away from doing idiosyncratic things just because they make sense to him. Heck, if hclasvegas is right, he might put a 2-bit dividend on the A-shares just to make them more attractive to the hoi polloi.

R:)

1 & 2 both for me are explained by Berkshire beeing seen as safe haven when the market gets more and more expensive and volatility increases. Many participants are then willing to pay more for Berkshire than at other times => Berkshire gets more expensive.

That Berkshire stays at the high end of it´s Price/BV range since quite some time now for me therefore is fully explained by this situation (markets very expensive, participants nervous) going on since a long time now.

As for your last argument: That Berkshire trades below IV is normal. When was Berkshire ever clearly undervalued (in 2000)?

" Heck, if hclasvegas is right, he might put a 2-bit dividend on the A-shares just to make them more attractive to the hoi polloi.

R:)"

They can't just declare a div on the A shares. All shares must be treated equally.

Could it be that the ratio of BRK's IV to Book has increased over the last few years? And that's what we'all are missing?

I think it makes sense that this ratio might rise (slowly) over time, but that doesn't mean it has. I remember mungofitch suggesting this back in the 2010(?) era, but it doesn't seem to have changed much since then.

In practice, I'd guess that medium/long term swings in the markets will easily outweigh this effect, making it small enough to be irrelevant. Right now we might be in a swing from growth towards value, which would be expected to raise p/b for BRK.

My thought way back then was that 1.75x would be a reasonable multiple, so anywhere in the 1.5-2.0 area could be expected. More or less by definition, if a company is returning 10-12%/year in modern markets then I think it is undervalued. Another way of looking at it, many other companies would look cheap at less than 2x book, and arguably Berkshire's book value is as solid as most of the market.

and perhaps most importantly

4) The CEO of Berkshire recently stood there and told us: BRK is trading a bit below its IV right now.

To me, the biggest risk is that Greg is behaving in a way that Warren wouldn't really love, but that Warren is being a good ex-CEO and giving Greg as much leash as he may need to either do what he needs to do or to hang himself.


I don't see any contradiction between what Buffett did and what Abel is now doing. Say, for instance, that Buffett thought that intrinsic value was at 2.0x book. AND he has always said he would repurchase stocks when the price is "meaningfully below" his estimate of intrinsic value, so he has stopped repurchasing at about 1.4x book. Now Abel comes along and may have exactly the same 2.0 number for intrinsic value, but as the cash builds wiithout meaningful cash deployment opportunities, he is willing to go a little closer, say 1.5-1.6x book, still "meaningfully below" 2.0, but not quite as much of a cushion.

Buffett might have eventually come to the same decision, or he might have come to that decision but decided to let Abel make the call. It doesn't really seem like a contradiction.

DTB

Buffett might have eventually come to the same decision, or he might have come to that decision but decided to let Abel make the call.

To me it seems gigantically unlikely that Abel and Buffett could sustain a material disagreement over what the Intrinsic Value (may peace be upon its name) of the company. But maybe, I guess.

Buffett might have eventually come to the same decision, or he might have come to that decision but decided to let Abel make the call.

To me it seems gigantically unlikely that Abel and Buffett could sustain a material disagreement over what the Intrinsic Value (may peace be upon its name) of the company. But maybe, I guess.


But I'm not saying they necessarily have any disagreement about what the intrinsic value.* Buffett's idea was to purchase when the price is "meaningfully below" intrinsic value. Both can have the same assessment of what intrinsic value, but a different judgment about what constitutes 'meaningfully below'. In my example, they could both thing that 2x BV is about right for intrinsic value, and Buffett interprets 'meaningfully below' as being <1.5x BV, whereas Abel thinks <1.75x BV is still a meaningful discount to the same IV.

dtb

*What is the definition of 'intrinsic value', anyway? Buffett has defined this as being the discounted value of all future cash flows, with the discount rate usually understood to mean somethiing like the 10-year Treasury rate (currently about 4.2%). This is not really a meaningful definition, for a firm that is growing faster than the discount rate, as the total of future payouts will be infinite.

But restricting value to the next 20 years, and using a five groves analysis, normalizing underwriting and investment returns to their 10-year average rate, gets Berkshire roughly $60b in annual earnings, for a market cap of $1050b, gives them a price earnings multiple of about 17. A multiple of 24 would be appropriate if they can increase their earnings 2% faster than the treasury rate. So I would say they are trading at a 'meaningful discount to intrinsic value'.

"Buffett has defined this as being the discounted value of all future cash flows, with the discount rate usually understood to mean something like the 10-year Treasury rate (currently about 4.2%)."

Graham used the AAA corporate bond yield, currently about 5.5%. Most people use their personal required return, 8%, 10%, whatever. The only discount rate that brings a future stream of cash flows back to present value is a discount rate equal to the total return.

"A multiple of 24 would be appropriate if they can increase their earnings 2% faster than the treasury rate."

Could you please explain this? Are you say that if Berkshire can increase earnings at 4.2% + 2% = 6.2%, then it deserves a PE of 24? Thanks in advance for explaining.

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