No. of Recommendations: 8
“If BRK.A declines another 5% (It's dropped 10% since the annual meeting from a P/B of 1.78 to 1.57x BV.), I think that Buffett will be repurchasing stock again, if he's not already.”
Agree & I do wonder if the $330+ billion in cash equivalents will make WEB more likely to repurchase shares at potentially a smaller discount to his I.V. range than he normally does. Willing sellers of significant A shares may be a bit harder to find. Honestly, I would be pleased, as long as repurchases are done at his I.V. “range”.
I also believe this would be a good idea, if there's nothing appealing to buy with all that cash - better than the alternative, a dividend, and Berkshire shares, while more expensive than usual, still seem to be within what Buffett might characterize as 'a zone of reasonableness'.
Accumulating cash for a while makes sense, but as Buffett himself has said, at some point, you can't justify holding hundreds of billions of cash indefinitely. If memory serves, he even gave himself a deadline of a couple more years, 4-5 years ago, beyond which it would be unconsciounable to keep holding so much cash, although I can't find the quote. That deadline is long past, but as far as I am aware Buffett has never acknowledged that he has missed his own deadline.
More fundamentally, intrinsic value has been defined by Buffett as being the discounted sum of all future cash flows (including liquidation), and in this sense, if Berkshire expects to maintain its outperformance above market averages, it doesn't take long for future growth to justify paying a bit more than the average price for Berkshire shares.
Personally, I would like to see something like a Dutch auction, using a couple of hundred billion dollars to substantially reduce the share count, instead of doing it in dribs and drabs. A stretch goal would be to cut the size of the firm in half with buybacks, and eventually bringing it back to a size where there are more opportunities to spend future cash on profitable acquisitions. It's too bad he didn't do this 15 years ago (his first repurchases were in 2011, when the company had a market cap of under $200b, but it wouldn't be impossible to get back to that size.
