share repurchases can be made at any time that both Warren Buffett, Berkshire’s Chairman and CEO, and Charlie Munger, a Berkshire Vice Chairman, believe that the repurchase price is below Berkshire’s intrinsic value, conservatively determined.”


Technically, this authorization would have to be revised, unless the seances are working.

But really, how much of a constraint is this? It is Buffett that has a range in his mind, and he is asked to repurchase only when shares trade below this range.

And what is the intrinsic value of a stock that trades at $399 and is expected to increase at, say, 8% a year, when 10-year Treasuries are at 4.6% and the S&P 500 as a whole is expected to return 2% over the next 12 years, starting from 5000. Serious question.

Buffett has said that the intrinsic value of a company is the "discounted value of the cash that can be taken out of a business during its remaining life." If you use 4.6% as the discount rate, and 8% as the growth rate for Berkshire's earnings, and assume that the P/E multiple is the same in 10 years, you get a present value of $549. Using a 5% growth rate, you get $415. That seems like a reasonably conservative determination of the lower bound of what we expect from Berkshire.

dtb