VALUE: After Hours (S08 E16): Berkshire Hathaway Buybacks: Is Greg Abel Paying More Than Buffett Would?

During their recent episode, Taylor, Carlisle, and Adam Mead discussed Berkshire Hathaway Buybacks: Is Greg Abel Paying More Than Buffett Would?. Here’s an excerpt from the episode:

[Tobias] Yeah. There was some, a few weeks ago, there was some, Berkshire was buying back some stock, but I saw some commentary that it might’ve been done at a higher price than Buffett might’ve done previously. Do you have any view on that?

[Adam] Yeah. I think Greg is going to, I think Greg is buying it back closer to intrinsic value. So they bought back, the 10Q just came out, they bought back 235 million of shares at $486 a share.

So that sort of roughly translates to a trillion, billion dollar, a little bit more than a trillion dollar valuation. So, but a tiny amount. So it looks like they, and that was just in March.

So it looks like, if you look at the price, probably like the last two weeks of March. So I think they’re doing it, but just sort of right at the margin. I mean, I really don’t see, unless, if the price goes down significantly, I would expect and hope that they would buy back more, but they’re probably buying, or Warren was probably comfortable getting up to like 90% of intrinsic value.

Greg might be putting it closer to 95%, which his calculus might be, hey, we’ve got 380 billion of cash in the books. We can let some of it go out closer to intrinsic value. But I trust him to make the right, that right choice.

But no, I peg Berkshire’s value kind of around 475 to 510 a share. So kind of right in that range.

[Jake] Adam, you’ve got a handicap. Which one’s going to be higher? The total number of shares, is it going to be purchased in the open market or done off market in like big blocks of some of these families that own a bunch of Berkshire for a long time?

[Adam] I mean, there’s precedent for that. I mean, we’ve seen that a couple of times.

[Jake] That guy was a pretty good size.

[Adam] Yeah. So even just kind of fast forward to, I had a kind of fun discussion with Brett Gardner, who wrote a good book, Buffett’s Early Investments, another great, good book. And he was saying, same thing, like, will Berkshire buy back Buffett’s shares kind of right away after he passes?

And I made the case, I think they’re going to stay in the foundations and kind of metre them out maybe over 10 years, just to keep that sort of lock on the voting power over Berkshire. But I wouldn’t be surprised to see, I mean, gosh, if 100 billion goes to his foundations kind of collectively, and they have to spend down 10 billion a year, I can imagine Berkshire negotiating directly with the foundation to make those purchases, if open market purchases aren’t available. I mean, it would make sense.

It really makes sense to do that.

[Tobias] Who else on the team? So you said there was a second desk with Katie Farmer and somebody else. What was your impression of those two?

[Adam] Yeah, Katie, I mean, she’s been running BNSF for about five years. I think I met her maybe two or three years ago on the floor. I mean, impressive woman.

I thought she- Did you help her up? What’s that? I was just joking.

I gave her some tips. Hey, let’s get this operating margin back up. No, she seemed confident.

I mean, I thought she presented well. I guess maybe I would have liked to see them get into some more of the nitty-gritty of kind of improving the railroad. I mean, they touched on a little bit with the technology and sort of the logistics and all that.

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VALUE: After Hours (S08 E16): Berkshire Hathaway Buybacks: Is Greg Abel Paying More Than Buffett Would?

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