Berkshire buyback criterion.
When the stock is substantially below intrinsic value.
As a proxy, at about a low 1.2 p/bk suggests to management that that's good enough below intrinsic value for a buyback.
gurufocus.com
My point is that if a stock trades at a low p/bk compared to the p/bk over the past years, the stock's possibly worth considering as a buy. In the case of Berkshire, for example, very worth considering, imo.
This method does not mean the stock price per share must be below the book value per share. That is, if a stock is trading at 1.5x bv, but historically has traded at say, 2.5x, then the stock might be reviewed for a buy.
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I see p/stated bv as being contextual.
I cannot see how shareholders can benefit from buying a share below book value per share other than if they held that share at the time the company was liquidated and they obtained a payout per share larger than the price they originally paid for that share.
Yes, unless there's liquidation, they can only benefit if the stock rises or dividends are paid. However, if the p/book value has often been higher, and the business hasn't changed much and/or is expected to muddle on, one can profit by purchasing the stock and waiting for a reversion-to-mean as the p/bk rises from the level it was at when the purchase was made. (Or as book value continues to rise but p/bk remains constant). |
