Please be positive and upbeat in your interactions, and avoid making negative or pessimistic comments. Instead, focus on the potential opportunities.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 2
The stock repurchase method simply says that IV is at least 5% above the highest repurchase price (or 7% above or 10% above. You decide.). Using 5%, IV is at least 5% above $627K/A-share, or $660K/A-share ($418/B-share). That price corresponds to 1.61x the BV at the beginning of Q2 and 1.58x the BV at the end of Q2.
No. of Recommendations: 7
This might be a case that you want to make a more nuanced distinction between A and B shares.
If you're going to read meaning into the buybacks, it's worth noting that Mr Buffett has been expressing a strong (and somewhat rising) preference for A shares over B shares. In recent periods that both A and B shares have been purchased, the ratio of prices has been around 1540, not the "economic interest" ratio of 1500.
So, though a share repurchase at $626,685 per A share in May might correspond to $417.79 per B in terms of economic interest, it seems likely that it corresponds to a willingness to do a repurchase at a B share price of only around $406.94.
If reading something into those transactions, it's also noteworthy that no shares were repurchased in June. Most days in June the A price was below $615000 for some or all of the day, so numbers around that level were not enough to tempt him. It wouldn't be a simple matter of having been distracted, as I'm sure he and the broker understand how to use limit orders : )
Jim
No. of Recommendations: 7
re: preference for A shares
In a quarter like this one, where there were no b-shares repurchased at all, I think it is quite likely that the A-shares purchased were the result of incoming calls and not "open market" purchases. I think when a large block of A-shares is offered to Warren / Mark Millard, they take the block. There might not be a ton to read into the price they pay, except that it was probably the market price at the time.
No. of Recommendations: 3
In a quarter like this one, where there were no b-shares repurchased at all, I think it is quite likely that the A-shares purchased were the result of incoming calls and not "open market" purchases. I think when a large block of A-shares is offered to Warren / Mark Millard, they take the block. There might not be a ton to read into the price they pay, except that it was probably the market price at the time.
💯
No. of Recommendations: 8
In a quarter like this one, where there were no b-shares repurchased at all, I think it is quite likely that the A-shares purchased were the result of incoming calls and not "open market" purchases. I think when a large block of A-shares is offered to Warren / Mark Millard, they take the block. There might not be a ton to read into the price they pay, except that it was probably the market price at the time.
FWIW, I don't believe this.
Sure, I think it's entirely likely that the occasional shareholder phones up and *offers* the shares.
But I think Mr Buffett is perfectly capable of saying "no thanks, please go ahead and sell them on the open market at the current bid, because I don't like 'em enough at that price".
Maybe you're right, but I definitely don't take it as a certainty that he has the company take everything offered. By extension, there is a valuation level at which he'll say "no".
Jim
No. of Recommendations: 10
nola622 wrote:
In a quarter like this one, where there were no b-shares repurchased at all, I think it is quite likely that the A-shares purchased were the result of incoming calls and not "open market" purchases. I think when a large block of A-shares is offered to Warren / Mark Millard, they take the block. There might not be a ton to read into the price they pay, except that it was probably the market price at the time.Jim wrote:
FWIW, I don't believe this.
Sure, I think it's entirely likely that the occasional shareholder phones up and *offers* the shares.
But I think Mr Buffett is perfectly capable of saying "no thanks, please go ahead and sell them on the open market at the current bid, because I don't like 'em enough at that price".
Maybe you're right, but I definitely don't take it as a certainty that he has the company take everything offered. By extension, there is a valuation level at which he'll say "no".I think nola622 and Jim are probably both right. I assume (hope) Jim is correct that there is some valuation level at which Mr. Buffett will say "no." The complete lack of repurchases in June lends some credence to that view.
At the same time, I think nola622 is generally correct that if a large block of A-shares is offered, Berkshire will purchase them at the current market price if that price is reasonable (even if it is not a discount to intrinsic value).
At the annual meeting this year, Warren had this to say in the context of Ruth Gottesman's $1B donation to the Albert Einstein College of Medicine:
But I have to say one thing that was astounding is that the same day we bought a billion dollars worth of Berkshire Class A stock from Ruth… So that… And I guess we were actually buying it from the school at that point because she’d just given [it to] them. And then… So the transaction was with them. But Mark Millard in our office bought a billion dollars from them, but he also bought $500 million worth of stock from somebody else that nobody will ever have heard of, and in a different state.https://steadycompounding.com/investing/brk-2024/Ruth Gottesman's donation was announced at the end of February, so I assume these two transactions were completed in February. With these two transactions totaling $1.5B, they account for most of the $1.8B in repurchases in February (2,945 A-shares at an average price of $621,187.44). And the February repurchases were significantly higher both in quantity and price than the repurchases in January (863 A-shares at an average price of $555,126.46). So, my guess is that Mr. Buffett was not buying A-shares at $621,187.44 in February because he thought they were a good deal, but rather because Ruth Gottesman and the other donor offered two large blocks of A-shares.
No. of Recommendations: 2
At the same time, I think nola622 is generally correct that if a large block of A-shares is offered, Berkshire will purchase them at the current market price if that price is reasonable (even if it is not a discount to intrinsic value).
That certainly makes perfect sense, no argument.
I imagine it sometimes gets hard to nail down what value might be, what might constitute "probably not above the middle of that", and what constitutes a discount, but these things don't have to be precise.
Jim
No. of Recommendations: 4
Three points regarding my post, if I may:
1. I have no argument with Jim's point that Warren appears to be willing to pay somewhat more than 1500x for A-shares than for B-shares.
2. I made an arithmetic error on the implied ratio of IV to starting BV. $660K (5% above the highest repurchase price) is 1.66x the starting BV for the quarter, not 1.61x. The implied IV is correctly stated as 1.58x the ending BV.
3. The implied IV/BV was higher in Q1 than in Q2. Warren paid 1.60x starting BV for the quarter in February and 1.56x ending BV. In March he paid 1.60x starting BV for the quarter and 1.57x ending BV. If these repurchase prices are 5% below IV, then the implied IV is 1.65x BV to 1.68x BV.
No. of Recommendations: 2
that Warren appears to be willing to pay somewhat more than 1500x for A-shares than for B-shares.
Isn’t the very point of Berkshire buying back A shares (instead of B shares) to prevent outsiders from accumulating them to potentially gain control? It could still happen as the float of A shares gets smaller and smaller, but there’s no way to prevent that after death of A share holders.
