Warren Buffett has had a fairly clear view on company buybacks in
past decades. In fact, the company has refused seriously looking into
the idea for 4 decades. That has suddenly changed and Berkshire has been
buying back shares of of his company.
Why Is Buffett Now Reversing Course?
We will speculate here since
we cannot ask Mr. Buffett.
There are probably two main explanations. Of course, the company has a
lot of liquidity and while that is generally a great thing, it also
makes it difficult to achieve higher returns in the meantime. However,
the main reason is that Warren Buffett is convinced that the stock is
undervalued and that buying back shares is doing a service to its
shareholders.
If Legendary Investor Warren Buffett Thinks BRK.B Is Undervalued?
You
would certainly think that the one person that can be most accurate
about the value of Berkshire’s stock would be Warren Buffett wouldn’t
you?
Why Now?
Here again, there are many
different possibilities but I think a strong one is that in periods of
high volatility such as the current one, more investors become
irrational which means more mispricings. It is certainly possible that
Berkshire is one of those assets that is being priced incorrectly.
Would I Be A Buyer?
I’m
rarely tempted by the fact that a company is buying back its own
shares. It is also rare that the company is doing this for the first
time in 4 decades though and that certainly speaks volumes. So would I
be a buyer? I would lean towards yes. How about you? Any thoughts on
buying Berkshire?
