Some long-time investors have said Berkshire shares were lately at their cheapest in a generation, and even analysts who were cautious on the stock acknowledged it was attractively priced. Yet Buffett has held his ground, preferring deals that grow margins and provide a return.
In his letter to shareholders last February, Buffett bragged that “not a dime of cash has left Berkshire for dividends or share repurchases during the past 40 years.” But Berkshire said yesterday it was now willing to pay up to 10 per cent more than book value for the stock.
“In the opinion of our board and management, the underlying businesses of Berkshire are worth considerably more than this amount, though any such estimate is necessarily imprecise,” Berkshire announced in a statement.
One long-time Buffett investor said the ‘Oracle of Omaha’ was effectively buying two things cheaply – Berkshire as an operating company for a broad set of industrial and consumer businesses, and Berkshire as a portfolio of stocks that have been heavily sold of late.
“There’s just so much leverage right now, this is close to as good a set-up as you might ever see, to be a domestic play in a land of people hating domestic, with double leverage,” said Bill Smead, chief investment officer of Smead Capital Management in Seattle.