BRK PBV 1.36 - Time for Selling a put

BRK price has come down to $340 (PBV 1.37 from $373 (PBV 1.48) a few days ago. I think it is fairly priced.

PBV of 1.28 is ~$320. It is a good time to sell puts and get easy 10%.


Getting to a price of buybacks

Dec15 310 put is at 2.72 now
if you go out further to Jan19 it is at 4.15, 320 put is 6.00, tempting

PBV is 1.33 at $331. It is probably tad bit higher since equities have come down but cash is raking in risk free money. I am a buyer at 1.26PBV which is around $315.

It is safe to do aggressive puts as WEB will provide downside protection as he buys back stock.

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That’s not a given at all. We got to 1x book in March 2020, remember, and he didn’t buy back a single share. He was too busy selling stuff.

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you should not be in the stock market if you want guarantees.

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Very true.

This is Buffett in 2011. I expect it’s still applicable:
“At our limit price of 110% of book value, repurchases clearly increase Berkshire’s per-share intrinsic value. And the more and the cheaper we buy, the greater the gain for continuing shareholders. Therefore, if given the opportunity, we will likely repurchase stock aggressively at our price limit or lower. You should know, however, that we have no interest in supporting the stock and that our bids will fade in particularly weak markets. Nor will we buy shares if our cash-equivalent holdings are below $20 billion*. At Berkshire, financial strength that is unquestionable takes precedence over all else.”

Safe! Lol!

(* now $30 billion)

Have you looked at a recent Berkshire 10Q filing? Check out the line that says “Short-term investments in U.S. Treasury Bills”. That line alone is nearly $100B in the last filing.

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Berkshire buyback history below. Given their market cap, cash holdings, Berkshire buyback is meaningless, volatile. I was hoping at one time they will buy back at least to the extent of their operating profit - cap-ex. Just to keep the cash hoard constant and we can view the buyback as a form of dividends. I think there is no clear coherent thesis behind the buybacks, at least one some dumb investor like me can understand nor spelled out by Warren.

Date Value
June 30, 2023 1.40B
March 31, 2023 4.45B
December 31, 2022 2.608B
September 30, 2022 1.055B
June 30, 2022 1.011B
March 31, 2022 3.18B
December 31, 2021 6.869B
September 30, 2021 7.632B
June 30, 2021 5.98B
March 31, 2021 6.58B
December 31, 2020 8.994B
September 30, 2020 8.973B
June 30, 2020 4.998B
March 31, 2020 1.741B
December 31, 2019 2.043B
September 30, 2019 674.00M
June 30, 2019 548.00M
March 31, 2019 1.585B
December 31, 2018 418.00M
September 30, 2018 928.00M

That is a lot of buying. About 10% shares retired ! BRK needs to deploy capital faster. I think they have about $500m coming in every week.

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As of 2023-Q2 cash was $142 billion. It has been over $100 billion since 2017. It’s not the absolute amount of cash that determines how much they buy back, though I believe it is a factor.

Agreed. You can’t base your own buy/sell decisions on what Buffett last bought at. He obviously uses more than valuation in his decisions. And you can’t expect him to prop up the stock price if the macroeconomic situation is looking bad. He will preserve cash (see March 2020).

Seems to me the buyback decision uses the macroeconomic situation, prospects of other uses for the cash, valuation, and absolute level of cash.

I think he has bought, unenthusiastically, when valuation was only OK, but cash was approaching some upper limit (maybe $150 billion?).

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Frankly everyone is saying macro economic situation is bad… but the truth is we have excellent employment and GDP is growing like gangbusters. If anything, we want the economy to cool. So I don’t buy that macro economic situation is bad. It could get bad, but we don’t know when.

We don’t know what drives WEB’s mood on buyback, clearly, Berkshire can benefit from a steady buyback without trying to market time. Of course WEB is a great capital allocator but he is also hitting 93, and he has a huge cash pile if he wants to do any deal. So the logic for hoarding cash vs buyback is not clear to me.

I don’t believe the current macroeconomic situation is looking bad. Looks pretty good to me.

Buffett might well be buying a lot now the price is down and cash pile is high.

Probability of bubacks goes up with pbv below 1.26