Warren Buffett Tells Investors He Will Buy Back Shares 'Aggressively' at Right Price
- By Holly LaFon
Warren Buffett (Trades, Portfolio) on Saturday faced multiple questions about his recent statements that he could repurchase up to $100 billion shares of his company, Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B).
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The intrinsic value of BRK.A
During the question and answer portion of his annual shareholder meeting, Buffett responded to the first question of why he did not buy shares at lower prices than his initial repurchase by saying he would only make repurchases when shares were "worth more the moment after they repurchased than the moment before." Buffett said he disagreed with the common corporate practice of setting an annual dollar amount they would spend per quarter or year.
The amount that he purchases also indicates how much he believes they are undervalued, but not to a vast degree.
"It's very simple. In the first quarter of the year you'll find we bought something over $1 billion worth of stock. That's nothing like my ambitions, but it means we feel we're okay buying it, but we don't salivate over buying it."
While repurchases in the first quarter left shareholders better off than they were before, but the difference isn't "dramatic," Buffett said.
"I would easily see periods where we would spend very substantial sums if we thought they were selling 25% or 30% less than they were worth and couldn't see anything better to buy," Buffett said.
"I predict we'll get a little more liberal at purchasing shares," Berkshire Hathaway's notably terse vice chairman, Charlie Munger (Trades, Portfolio), added.
In an answer to another questions related to repurchases, Buffett said he conjured the $100 billion repurchase figure quoted in the Financial Times article on the spur of the moment and through no thorough calculations. But, Buffett explained, he had been a shareholder of companies that reduced 70-80% of their share count over time.
"We wouldn't hesitate to spend $100 billion," Buffett said.
It would depend on price, but when the right one comes, he reminded the shareholder asking the question that he and his associates had no trouble being decisive, though they rarely said yes. If the shareholder offered him a million-dollar business for $300,000, "you'll get your 'yes' very quickly," Buffett said.
Most of the buy backs would be of the B-class of shares, but only because there are more of them and they have greater liquidity than the pricey A-class shares. They could buy either class of shares in blocks from shareholders as they have in the past from investors like the Washington Post.
"We don't have a master plan on that other than to buy aggressively when we like the price," Buffett said.
See Warren Buffett (Trades, Portfolio)'s portfolio here.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 7 Warning Signs with BRK.A. Click here to check it out.
The intrinsic value of BRK.A