No. of Recommendations: 19
Maybe the market will leave Berkshire trundling along at 1.25 times book for a few years after Mr Buffett is no longer in charge, or no longer seen to be in charge. An ongoing buyback scheme would burn off steam gradually, but perhaps after a while, preferably during a particularly weak stretch of pricing, management does a bazillion dollar dutch auction tender offer. That could burn off $300bn overnight.
The problem is that all great businesses are, as a rule, great for only so long. Most moats fade away at some point, so any portfolio of the "best" businesses needs renewal. A giant buyback would be buying more and more of whatever has been held for a very long time, much of which is past its prime. This is a distant second place to new acquisitions that are high quality businesses with not-yet-stale time horizons. If only they can be found.
Buybacks increase value per share only very slightly because it takes very large purchases at very large discounts to fair value to make a difference. But their rationale relies on the non-cash holdings being very good quality. Hands up, everybody who wants a double helping of Pacificorp and Coke and Kraft and Occidental...
Jim
