“In share repurchases, it is not about how much you are spending. We will repurchase stock when we feel it is trading below an intrinsic value. We want to be sure the people who have not sold shares are better off post the repurchase,” he said.
Addressing the shareholders at the company’s annual general meeting at Omaha, Buffett said Berkshire is not shying away from buying back shares.
“We used to have a policy of tying with book value, but it has become obsolete. We like the idea of buying shares at a discount. If we get to buy shares cheap from our shareholders, who are our partners, we want to make sure that they have the same information that are available to me and Charlie. If we get to buy shares below their intrinsic value, we will be good at buying them decisively. So buying back shares is an easy decision,” he said.
Berkshire Hathaway Inc bought back over $1 billion worth of its Class B stock last year.
Asked why Berkshire didn’t purchase more shares in the first quarter of 2019 when the stock traded below $207, he said: “Whether we have $100 billion or $200 billion, it does not make any difference in our approach to the repurchase of share.”
“We will buy the stock if we think it is selling below its X amount of intrinsic value. Intrinsic value is not a specific point. It is probably a specific range,” the legendary investor said.
He said the real thing is to purchase a share when it becomes price worthy.
In one of his earlier interviews, Buffett had said the company may buy back shares worth $100 billion, which is around 20 per cent market capitalization of Berkshire Hathaway.
Asked how he arrived at the figure for share repurchase, Buffet said: “I probably arrived at that $100 billion number in about three seconds.”
“It is a nice round figure we would like to do it. We have been involved in companies where the numbers of shares have been reduced by 70-80 per cent. We like the idea of buying shares at a discount. If I get stock at cheap intrinsic value, we will not hesitate,” he said.
“We don’t say ‘Yes’ very often,” he added.
Asked about his preference among the two classes of Berkshire shares while repurchasing, Buffett said: “We will probably buy Class B shares more, because their trading volume is considerably higher than that of Class A shares.”
However, his partner Charlie Munger said he doesn’t think we care much which class we buy.
Berkshire Hathaway’s Class A were traded at $3,27,765 per share on Friday, whereas Class B were at $218.60.
While sharing his view on Kraft-Heinz, Buffet said that the company is doing very well operationally, but he admits that Berkshire paid too much for the Kraft part of it.
“You can turn any investment into a bad deal by paying too much. What you can't do is turning something into a good deal by paying little,” said Buffett.
Shares of Kraft Heinz currently trade at $32.58 per share from nearly $60 a year ago
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