What Action Should Current Shareholders Take?
If something like the above model of a shareholder buyback comes to pass, Berkshire is likely to emerge as as a value stock far cheaper than its current above 22 or so price earnings ratio suggests. It could well have a P/E of about 15 or 16 after the share buybacks. This handles one of the shareholder concerns as to whether Greg Abel can use the huge cash position in a positive way without the risk and likely premium necessary in making a large acquisition. Bear in mind that in recent large acquisitions Buffett has had to pay a 20-30% premium. How much better to avoid risking a large acquisition and simply own more of the asset Buffett and Greg Able know best - Berkshire itself.

In my case, at age 81, I would be more willing to take my chances and hope that the next Democrat President emerges from the more reasonable and less confiscatory side of the party. In any case there are three more years to think about what action to take while the step-up cost basis at the time of death is still in effect. There's some arithmetic in that too, by the way. You would look at the various tranches at which you bought Berkshire, calculate the taxable amount and run it against your own tax situation before deciding that a trimming or sale on Berkshire is in question. If it becomes a deep value stock, which it has the power to be, it's as likely as any asset to hold its own as the more overpriced parts of the market suffer in one way or another until they have worked off excessive valuations. That's one man's view, happy that my own son seems to be close to the same view. It's nice age diversification, by the way, to have a smart son who is working from his own perspective on the same problem. The first thing to do in most situations is just stand there, don't rush to do something. If major share buybacks happen, doing nothing will end up having been a pretty good strategy.

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