Most of the time BRK seems to trade south of its IV, at least as calculated by most on this board and many respected analysts/investors. The short periods when it does trade above IV, it trades at only a modest premium and not at nose bleed levels. So an automatic repurchase program will not lead to a bad result. Alternatives like a dividend, or getting into auctions for acquisitions would be much worse.



If Berkshire usually trades below its value (a proposition which I agree has been true for most of the past 20 years), then repurchasing shares will usually be the right way to go. And in retrospect, a policy of automatic repurchase would have been fine, up to now. Suspending the repurchases and either accumulating cash or paying a dividend would be the right policy if the Berkshire shares rose beyond intrinsic value. Suspending repurchases also makes sense if a major acquisition is anticipated, and this is something Buffett has also done recently.

But I can't really see why Berkshire's policy should ever be like Apple's, where shares are repurchased with the same enthusiasm at 30 times earnings as they were at 8 times earnings, with no consideration of their value or of other alternative uses of capital. If Berkshire's new management were to ever adopt a policy of paying dividends and repurchasing shares all the time in the same proportions, I would seriously question whether Buffett had succeeded in arranging for a succession where his value orientation was maintained.

DTB