The longer your compound capital, the less you need luck and the more you need Shrewdness.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 0
Highest price he has bought back stock?
Sell long dated puts?
No. of Recommendations: 0
Sell long dated puts?
I started last Friday at the close. I think they were Jan '27 puts. I chose whichever were furthest out at the time.
No. of Recommendations: 0
A bit late, boys. Why didn't you do so when Berkshire´s price was really far ahead of itself?
No. of Recommendations: 16
BRK/B $484/share Highest price he has bought back stock?
Mr Buffett likes A shares. A lot get bought from long term shareholders which say little about his view on value, and there is a strong preference for the extra voting rights. In short, his opinion of the right price to pay between A and B shares is very much not a ratio of 1500:1.
So it's worth noting that the highest price paid to date for a B share during a buyback has been $357.22, not $484.
The highest price paid for an A share to date in a buyback has been $626686. It seems likely that was for nono-economic reasons from a long term shareholder, so personally I wouldn't read much into that or the ones just before it. I don't think he has ever done a buyback for economic reasons at a valuation higher than 1.48 times known book.
It's probably better to have your own idea of what a share is worth. The shares are certainly still more fully priced right now than the 17.5 year average (post 2008). I estimate that at $480.73 as I type, they're at a valuation level about 14-23% higher than average since then, depending on your favourite metric.
Jim
No. of Recommendations: 2
A bit late, boys. Why didn't you do so when Berkshire´s price was really far ahead of itself?
I think you missed that they are discussing selling puts and not calls
No. of Recommendations: 1
A bit late, boys. Why didn't you do so when Berkshire´s price was really far ahead of itself?
Selling puts means you are agreeing to buy the shares at a fixed price in the future. Selling them when the price is very high is much less profitable than selling them when the price has dropped. It might make sense to sell calls when the price is far ahead of itself, but if you are selling puts, it is better to sell them at a high price when the price of the underlying shares is low and maybe buy them back for next to nothing when the price of the underlying shares has moved far ahead.
dtb
No. of Recommendations: 8
A bit late, boys. Why didn't you do so when Berkshire´s price was really far ahead of itself?
Some people did. I wrote some $550 calls on May 2, the day of the high, and got a premium of $41.84 for them, breakeven $591.84. So far I've made 84% of the maximum possible profit. (I've been net short Berkshire since then).
The price is lower, but not cheap right now. Even so, writing cash-backed puts could already make some sense depending on a person's situation.
Suppose you have a pile of cash earning interest, and want to deploy it into Berkshire but only at a good valuation multiple, or at least not worse than average. To take a random example, if that person write January $460 put for a premium of $14.50, the two outcomes are: (a) you get 6.0%/year return on your committed capital in addition to the ~4%/year you're earning on the cash deposit, total 10%/year rate. Not so shabby. Or, (b) you get an entry to Berkshire at $445.50 a share. Year end on trend book might be around $322ish as a wild guess?? So that would be an entry price of 1.38 times book, not richly priced. It is highly unlikely for options to be exercised early if they can be sold for any positive time premium, so you'd probably also get the interest on your cash for all or almost all the period.
It would be better to do this on a panicky day in the market, if Mr Market is in the mood to offer one. And of course at a lower price for a B share.
Jim
No. of Recommendations: 1
I think you missed that they are discussing selling puts and not calls
I missed that it's about selling puts, not buying.
Excuse: It's far too hot here in Germany currently and I made the mistake to leave my AC today = brain cooked.
No. of Recommendations: 1
I just had a look at my profits from Berkshire puts: Last year 5% of net assets, this year 10% (1% currently paper gains, as I am still holding my Dec/Jan puts).
That is (together with today´s 39 Degrees Celsius outside) why I was misreading "selling puts", as since 12 months the word "puts" for me is linked to buying them.
Unfortunately the fun is mostly over, with the probability of Berkshire going down further now dramatically lower than a few months ago, too low for "betting the bank".
