Monday, September 26, 2011

Berkshire Hathaway Share Buyback

Well Berkshire Hathaway finally decided that a buyback was warranted because of the low price of the shares (Read Here).  Recently the stock has been selling for around book value. 

In some recent posts (Here and Here) I discussed the business and the assets and gave an estimate at how cheap they are. 

If and when Mr. Buffett ever decides to buy back a share of Berkshire, he effectively is buying his own businesses.  He is buying another Geico, Burlington Northern, National Indemnity, Mid American, Benjamin Moore, International Dairy Queen, See's Candy, Nebraska Furniture Mart, Netjets, Clayton Homes, and many more. 

Many of these companies are worth much more than book value.  Given they have grown their earnings by 20% for several decades these businesses are fantastic.  Demand for their products or services is the evidence. 

To me the bigger value is in Berkshire's common equity holdings that are selling for multi-year or decade lows relative to the underlying business performance.  Many of these companies are the cream of the cream that can earn very high returns on equity. 

Best Regards,

Disclosure - Long BRK.b

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