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friendly moves. Several times over the past 25 years I pounded the table to buy brk because Buffett had no choice but to make shareholder friendly moves to generate increased demand for the common. HE finally authorized a buyback and the stock responded 3-5 % higher. He finally raised the buyback limit to 1.2 xs BV, and the stock responded. HE finally raised the buyback to, material discounts to IV, and the stock responded.

Let's try to add a few old timers to the very short critical thinker list.

Does NVDA pay a, " meaningful div"?
Does Meta pay a, " meaningful div"?
Do googl, aapl, msft, crm, etc pay a " meaningful div"?

No one ever suggested that brk become a high yielder, or that brk should pay a, " meaningful div", to compete with MLPs, REITS, or utilities.

These firms all initiated a small dividend because they understand that there are trillions of potential investor dollars, GLOBALLY, that cannot or will not buy a non-dividend paying stock. This isn't too complicated. To insist that ALL these firms are run by poor capital allocators who don't understand the business, taxes, etc, is embarrassing, to be kind.

If Greg is nearly as sharp as Buffett claims, HE gets it, and brk will initiate a NON meaningful div by year end. 50 cents quarterly sets the table, .75 quarterly would be better, I would do 1$$ and argue that brkb is a safer, better, less concentrated alternative to SPY at this time. This move will increase demand for brkb common, and once again, I'm front running the news. Long brkb short the puts.

Let's go gang, who wants to get out in front of this news and join the long list of deep thinkers in brkville?

No one aggressively joined me in calling for an authorized buyback 20 years ago. Will anyone here step up and say, ok, I get it, I'm very stubborn but I get the concept, all these other huge American firms can't be poor capital allocators, stupid and misguided. THIS is the appropriate time for brkb to initiate a quarterly dividend, which will increase demand for brkb common, globally.

That's my call, and if no one agrees I might double down, even more convinced I'm correct and early, again. :::)))

So, Buffett started buying back stock to “generate increased demand for the common”?

Is this what you really think? He was sitting around and said to himself, ‘I need to get more demand for our stock, to drive it up (this is what demand does) so let me show the world that I am buying it back so they all can compete with me for shares’

Really?!?

" So, Buffett started buying back stock to “generate increased demand for the common”?"


Oh my.

you didn't answer my question, par for the course, I guess

Anyone see any news to explain this INCREASE in DEMAND, which tends to push stocks higher?

Maybe Buffett is right, Greg is better suited to run brkb, going forward?

Micky Mantle and Willie Mays broke my young heart when they realized it was time. We love you uncle, but it was time, thank you.

" you didn't answer my question, par for the course, I guess."

With all due respect, I'm anxiously awaiting brother Jims 500-word response, which no doubt will convince me there is no point in debating the issue. I made my point let's see what happens.

Today we see increased demand again, which tends to push puts lower and the common higher, WHO KNEW?

Yikes, I think I convinced Jim to take brkb private, at 575, all cash deal!


UCMTSU, NO WAY!

Anyone see any news to explain this INCREASE in DEMAND, which tends to push stocks higher?

That is something that you take as an axiom, without bothering to consider whether there is any evidence for it. Is there?

Financial securities are not the same as capital goods in that sense. A bag of fifty $100 bills is worth $5000. It doesn't matter a whit how many people want to buy a bag like that (demand), nor how many such bags are for sale (supply). There are short term price squiggles for anything, but over time it's not the demand or supply that determines the going price of a purely financial asset, it's the average amount people think it's worth: pretty darned close to $5k, I imagine.

Using book as the currently convenient metric for Berkshire, both value per share and price per share have risen at precisely the same rate in the last 23 years. (Ignore that book per share is changed by buybacks. Let's just say there is also some other equally accurate valuation metric that has also risen the same rate as price in the last 23 years). Berkshire shares are, within convenient rounding error, exactly as expensive now as in Feb 2003.

So...
You think that if there had been more buybacks, the valuation multiple would have expanded in that interval rather than being flat, and that both the valuation multiple and the price would as a result be higher today? Why? And by how much? What annualized rate of getting more expensive?

Do you expect that the more expensive situation would continue at today's new higher level indefinitely, or continue to expand to higher and higher and higher levels forever, or revert back to the trend of value? Would price continue to pull away faster than value? And what is the reasoning behind your choice?

Incidentally, I think the market price would in fact be higher today had there been more buybacks in the past. But not all that much. Primarily because now, with hindsight, we can see some past periods with (a) valuations that were lower than Feb 2003 or Feb 2026 and (b) excess cash that was ready to deploy on short notice that was not deployed because no opportunity came up. There is a problem with using hindsight to justify a decision, of course : )

Jim

How often does brkb rally 6 % in a few days with no news? Thank you.

XOM has rallied 23% over the last 20+ days.

Lots of early cycle stocks are rallying. Even the transports.

It is true that BRKb has little exposure to the stocks getting crushed. Other than Googl most of our holdings are up nice.

Early yesterday there were aggressive buyers taking the offers on the calls. The volume in the common was very high, almost 9 million so they did have the buying power to move the stock up 3- 4 percent until the sellers hit it back down from the daily highs later in the day. Up 2 percent for the day was a nice move from under 480 a week ago.

Let's see how much fire power they have today but getting back above 500 certainly happened much quicker than I expected.

“ Let's see how much fire power they have today but getting back above 500 certainly happened much quicker than I expected.”

Maybe Greg likes round numbers?
“Buy anything under five Benjamins, and do it NOW!”

“ Maybe Greg likes round numbers?
“Buy anything under five Benjamins, and do it NOW!” Good morning, there is a very slight chance that while Buffett is alive Brk will buy brkb in size at 1.7 xs BV but very unlikely. Brkb trading up this sharply greatly increases the probability of initiating a quarterly dividend between 50 cents and a dollar by year end. No need for further debate on this prediction.

AdrianC, let me ask you a hypothetical. In 1999 if a shareholder me , asked Buffett and munger, please look out 25 years, pretend Brk has a market cap of one trillion dollars and 35 percent is cash , t bills, and brkb is trading at 1.7 xs BV, what would you do? Charlie would respond, that’s an ignorant hypothetical unworthy of response. Buffett would respond, I agree with everything Charlie said. I respond, humor me fellas, I’m a loyal long time partner, and a good boy in general, humor me, what’s your next move? In view of current market conditions, the current valuation and concentration of spy etc, what’s your next move? If Greg is as sharp as Buffett claims this is so obvious that a few of the old timers here might agree with me before Brks BOD acts, now that would be a miracle. What do you think, Thanks pal.

AdrianC, let me ask you a hypothetical. In 1999 if a shareholder me , asked Buffett and munger, please look out 25 years, pretend Brk has a market cap of one trillion dollars and 35 percent is cash , t bills, and brkb is trading at 1.7 xs BV, what would you do?

Wait for it to get to <1.4 x book (might be pretty close already) and buyback aggressively. It's the most tax-efficient way to "return cash" to shareholders.

I've been a keen watcher of Berkshire for those 25 years. What we're seeing now isn't typical since 2008. From 2008 to 2025, the average year end price to book is 1.34. There will be opportunities for significant buybacks. I didn't think there ever would be while Buffett was still around, and I expect Buffett thought the same, but there was: nearly $80 billion bought back. It will happen again, probably very soon.

An ongoing small dividend does nothing to "help" with the cash pile.

" An ongoing small dividend does nothing to "help" with the cash pile."


Thanks for the response, but I'm not shocked. On May 2, if not sooner, we will find out IF Buffett is still in total control or IF our BODS is now calling the shots. In taxable accounts I can't sell anyway, and I'm accustomed to waiting, years, for brk to do the right thing.

Now let's chat about what's really important in brkville, what did Gates do this weekend? ::))

Stay healthy pal, I want us both around, and Buffett too, to watch brkb buy size below 1.4 xs BV!

Dividends
A number of Berkshire shareholders – including some of my good friends – would like Berkshire to pay a
cash dividend. It puzzles them that we relish the dividends we receive from most of the stocks that Berkshire owns,
but pay out nothing ourselves. So let’s examine when dividends do and don’t make sense for shareholders.
A profitable company can allocate its earnings in various ways (which are not mutually exclusive). A
company’s management should first examine reinvestment possibilities offered by its current business – projects to
become more efficient, expand territorially, extend and improve product lines or to otherwise widen the economic
moat separating the company from its competitors.
I ask the managers of our subsidiaries to unendingly focus on moat-widening opportunities, and they find
many that make economic sense. But sometimes our managers misfire. The usual cause of failure is that they start
with the answer they want and then work backwards to find a supporting rationale. Of course, the process is
subconscious; that’s what makes it so dangerous.
Your chairman has not been free of this sin. In Berkshire’s 1986 annual report, I described how twenty
years of management effort and capital improvements in our original textile business were an exercise in futility. I
wanted the business to succeed and wished my way into a series of bad decisions. (I even bought another New
England textile company.) But wishing makes dreams come true only in Disney movies; it’s poison in business.
Despite such past miscues, our first priority with available funds will always be to examine whether they
can be intelligently deployed in our various businesses. Our record $12.1 billion of fixed-asset investments and bolt-on acquisitions in 2012 demonstrate that this is a fertile field for capital allocation at Berkshire. And here we havean advantage: Because we operate in so many areas of the economy, we enjoy a range of choices far wider than that open to most corporations. In deciding what to do, we can water the flowers and skip over the weeds.
Even after we deploy hefty amounts of capital in our current operations, Berkshire will regularly generate a
lot of additional cash. Our next step, therefore, is to search for acquisitions unrelated to our current businesses.
Here our test is simple: Do Charlie and I think we can effect a transaction that is likely to leave our shareholders
wealthier on a per-share basis than they were prior to the acquisition?
I have made plenty of mistakes in acquisitions and will make more. Overall, however, our record is
satisfactory, which means that our shareholders are far wealthier today than they would be if the funds we used for
acquisitions had instead been devoted to share repurchases or dividends.
But, to use the standard disclaimer, past performance is no guarantee of future results. That’s particularly
true at Berkshire: Because of our present size, making acquisitions that are both meaningful and sensible is now
more difficult than it has been during most of our years.
Nevertheless, a large deal still offers us possibilities to add materially to per-share intrinsic value. BNSF is
a case in point: It is now worth considerably more than our carrying value. Had we instead allocated the funds
required for this purchase to dividends or repurchases, you and I would have been worse off. Though large
transactions of the BNSF kind will be rare, there are still some whales in the ocean.
The third use of funds – repurchases – is sensible for a company when its shares sell at a meaningful
discount to conservatively calculated intrinsic value. Indeed, disciplined repurchases are the surest way to use funds intelligently: It’s hard to go wrong when you’re buying dollar bills for 80¢ or less. We explained our criteria for repurchases in last year’s report and, if the opportunity presents itself, we will buy large quantities of our stock. We originally said we would not pay more than 110% of book value, but that proved unrealistic. Therefore, we
increased the limit to 120% in December when a large block became available at about 116% of book value.

But never forget: In repurchase decisions, price is all-important. Value is destroyed when purchases are
made above intrinsic value. The directors and I believe that continuing shareholders are benefitted in a meaningful
way by purchases up to our 120% limit.
And that brings us to dividends. Here we have to make a few assumptions and use some math. The
numbers will require careful reading, but they are essential to understanding the case for and against dividends. So
bear with me. We’ll start by assuming that you and I are the equal owners of a business with $2 million of net worth. The business earns 12% on tangible net worth – $240,000 – and can reasonably expect to earn the same 12% on
reinvested earnings. Furthermore, there are outsiders who always wish to buy into our business at 125% of net
worth. Therefore, the value of what we each own is now $1.25 million.
You would like to have the two of us shareholders receive one-third of our company’s annual earnings and
have two-thirds be reinvested. That plan, you feel, will nicely balance your needs for both current income and
capital growth. So you suggest that we pay out $80,000 of current earnings and retain $160,000 to increase the
future earnings of the business. In the first year, your dividend would be $40,000, and as earnings grew and the one-
third payout was maintained, so too would your dividend. In total, dividends and stock value would increase 8%
each year (12% earned on net worth less 4% of net worth paid out).
After ten years our company would have a net worth of $4,317,850 (the original $2 million compounded at
8%) and your dividend in the upcoming year would be $86,357. Each of us would have shares worth $2,698,656
(125% of our half of the company’s net worth). And we would live happily ever after – with dividends and the
value of our stock continuing to grow at 8% annually.
There is an alternative approach, however, that would leave us even happier. Under this scenario, we
would leave all earnings in the company and each sell 3.2% of our shares annually. Since the shares would be sold
at 125% of book value, this approach would produce the same $40,000 of cash initially, a sum that would grow
annually. Call this option the “sell-off” approach.
Under this “sell-off” scenario, the net worth of our company increases to $6,211,696 after ten years
($2 million compounded at 12%). Because we would be selling shares each year, our percentage ownership would
have declined, and, after ten years, we would each own 36.12% of the business. Even so, your share of the net
worth of the company at that time would be $2,243,540. And, remember, every dollar of net worth attributable to
each of us can be sold for $1.25. Therefore, the market value of your remaining shares would be $2,804,425, about
4% greater than the value of your shares if we had followed the dividend approach.
Moreover, your annual cash receipts from the sell-off policy would now be running 4% more than you
would have received under the dividend scenario. Voila! – you would have both more cash to spend annually and
more capital value.
This calculation, of course, assumes that our hypothetical company can earn an average of 12% annually on
net worth and that its shareholders can sell their shares for an average of 125% of book value. To that point, the
S&P 500 earns considerably more than 12% on net worth and sells at a price far above 125% of that net worth.
Both assumptions also seem reasonable for Berkshire, though certainly not assured.
Moreover, on the plus side, there also is a possibility that the assumptions will be exceeded. If they are, the
argument for the sell-off policy becomes even stronger. Over Berkshire’s history – admittedly one that won’t come
close to being repeated – the sell-off policy would have produced results for shareholders dramatically superior to
the dividend policy.
Aside from the favorable math, there are two further – and important – arguments for a sell-off policy.
First, dividends impose a specific cash-out policy upon all shareholders. If, say, 40% of earnings is the policy, those who wish 30% or 50% will be thwarted. Our 600,000 shareholders cover the waterfront in their desires for cash. It is safe to say, however, that a great many of them – perhaps even most of them – are in a net-savings mode and
logically should prefer no payment at all.

The sell-off alternative, on the other hand, lets each shareholder make his own choice between cash receipts
and capital build-up. One shareholder can elect to cash out, say, 60% of annual earnings while other shareholders
elect 20% or nothing at all. Of course, a shareholder in our dividend-paying scenario could turn around and use his
dividends to purchase more shares. But he would take a beating in doing so: He would both incur taxes and also pay
a 25% premium to get his dividend reinvested. (Keep remembering, open-market purchases of the stock take place
at 125% of book value.)
The second disadvantage of the dividend approach is of equal importance: The tax consequences for all
taxpaying shareholders are inferior – usually far inferior – to those under the sell-off program. Under the dividend
program, all of the cash received by shareholders each year is taxed whereas the sell-off program results in tax on
only the gain portion of the cash receipts.
Let me end this math exercise – and I can hear you cheering as I put away the dentist drill – by using my
own case to illustrate how a shareholder’s regular disposals of shares can be accompanied by an increased
investment in his or her business. For the last seven years, I have annually given away about 4 1⁄4% of my Berkshire
shares. Through this process, my original position of 712,497,000 B-equivalent shares (split-adjusted) has
decreased to 528,525,623 shares. Clearly my ownership percentage of the company has significantly decreased.
Yet my investment in the business has actually increased: The book value of my current interest in
Berkshire considerably exceeds the book value attributable to my holdings of seven years ago. (The actual figures
are $28.2 billion for 2005 and $40.2 billion for 2012.) In other words, I now have far more money working for me
at Berkshire even though my ownership of the company has materially decreased. It’s also true that my share of
both Berkshire’s intrinsic business value and the company’s normal earning power is far greater than it was in 2005.
Over time, I expect this accretion of value to continue – albeit in a decidedly irregular fashion – even as I now
annually give away more than 4 1⁄2% of my shares (the increase having occurred because I’ve recently doubled my
lifetime pledges to certain foundations).
* * * * * * * * * * * *
Above all, dividend policy should always be clear, consistent and rational. A capricious policy will
confuse owners and drive away would-be investors. Phil Fisher put it wonderfully 54 years ago in Chapter 7 of his
Common Stocks and Uncommon Profits, a book that ranks behind only The Intelligent Investor and the 1940 edition
of Security Analysis in the all-time-best list for the serious investor. Phil explained that you can successfully run a restaurant that serves hamburgers or, alternatively, one that features Chinese food. But you can’t switch
capriciously between the two and retain the fans of either.
Most companies pay consistent dividends, generally trying to increase them annually and cutting them very
reluctantly. Our “Big Four” portfolio companies follow this sensible and understandable approach and, in certain
cases, also repurchase shares quite aggressively.
We applaud their actions and hope they continue on their present paths. We like increased dividends, and
we love repurchases at appropriate prices.
At Berkshire, however, we have consistently followed a different approach that we know has been sensible
and that we hope has been made understandable by the paragraphs you have just read. We will stick with this policy
as long as we believe our assumptions about the book-value buildup and the market-price premium seem reasonable.
If the prospects for either factor change materially for the worse, we will reexamine our actions.

A dividend might come eventually. I think repurchasing shares near fair-value will be preferred by most shareholders but not all. If BRK price/BV ratio keeps increasing as BRK holds more cash I sure don't want a dividend unless we expect the the ratio to rise significantly if they lower the cash balance. Does anyone have an estimate of what the ratio would be if Berkshire reduced cash down to $50B? The world will never know. I expect Greg to buy back a lot more shares at higher ratios than Buffett did. Hopefully the share price will stay within reason of fair-value and that will work out well. If it doesn't he might start a dividend. I trust Greg and team to do what is reasonably logical, if not perfect.

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