Buffett may buy back Berkshire shares
raveninvestment.com
William Hanley
National Post
Monday, March 13, 2000 - Warren Buffett, the legendary value investor, says he may buy back shares for the first time ever in his Berkshire Hathaway Inc., which have fallen almost 50% in the past year.
In remarks issued with the Berkshire annual report on the weekend, Mr. Buffett blamed himself for the poor performance of the Omaha, Neb., holding firm, which wholly owns insurance and other businesses and invests in the stock of companies such as Coca-Cola Co. and Gillette Co.
Berkshire shares have been whipsawed by tough business conditions in insurance and falling stock prices in old-economy firms. Meanwhile, Mr. Buffett refuses to invest in the hot technology issues that are leading the market.
With the Berkshire A shares closing on Friday at $41,300, off from the 52-week high of $81,100, Mr. Buffett said Berkshire might buy back shares under $45,000 (all figures in U.S. dollars).
The company will consider offers made at or below the latest bid for Berkshire shares on the New York Stock Exchange, he said. Berkshire will only entertain offers for at least 10 class A shares or 50 class B shares. Class Bs, which equal about 1/30 of an A share, closed Friday at $1,370.
There's no guarantee Berkshire will buy back any shares, he said. "We will never make purchases with the intention of stemming a decline in Berkshire's price," Mr. Buffett wrote. "Rather, we will make them if and when we believe that they represent an attractive use of the company's money."
At current levels, Berkshire is trading just above book value and is below the "intrinsic" value that Mr. Buffett imputes to the stock. Many businesses are on the books at the same price at which they were bought years ago.
John Zemanovich, a senior portfolio manager for Raven Investment Management Inc., said at these levels and with a buyback program perhaps in the works, Berkshire is a compelling value. "This is the year when people will want to partner Mr. Buffett," he said yesterday. "It's easy money. If there's a bear market, who else would you want in your corner than Warren Buffett?"
Mr. Zemanovich noted Berkshire has $34-billion in cash and fixed-income instruments waiting to be deployed, some critics say Mr. Buffett's failure to deploy that huge amount in investments producing strong returns means Berkshire is behind the times. |
