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Buffett to buyback 120% of book value

Buffet views the stocks as undervalued so involved in repurchases of shares.
Berkshire Hathaway Inc. (NYSE:BRK.A) will repurchase the stock for 120% of book value, a measure asset minus liabilities. The old limit was 110%.

After a long era of 4 decades, the company started the buy back program in 2011. Last year the company repurchased less than $100 million stock. And since then not done any such things. Now it is planning to buy back the shares again in the current year.

This repurchase program intends to increase the stock value of the shares. On Sep 30 the book value a share was $111,718. Berkshire Hathaway Inc. (NYSE:BRK.A) invested about $134,062. As a result the shares are going up by 4% to $134,000.

According to Mr. Meyer Shields an analyst at Stifel Nicolaus & Co the correct way of repurchase should to raise the shares floor valuation.

When the board sanctioned a limit of 120 percent, Berkshire Hathaway Inc. (NYSE:BRK.A) buyback 9,200 Class A shares for $131,000 each. The cost is $1.2 billion, or about one month of income for the company. The company maintains a market value of $220 billion.
Ample Funds:

The cash hoard of Berkshire increased to 17% to $ 47.8 Billion in Sept. 30, which is $115 million less than that of June 2011. Now buffet is searching some new acquisition plan in order to invest the funds.

The Vice Chairman Charles Munger, 88 and Buffett, 82 agree on buyback program when two conditions are fulfilled. Firstly when the company has enough funds to meet its operational as well as liquidity needs. And secondly when its

stock is selling at a material discount.

Mixed Emotions:

Berkshire Hathaway Inc. (NYSE:BRK.A) is planning some arrangements to buyback about 5000 shares a quarter, shield side. He raised his projection of adjusted earnings per share to $ 8,521 for the next year from a prior estimate of $ 8439.

Berkshire Hathaway Inc. (NYSE:BRK.A) do not intend their shareholders to the sale of their stock by year-end 2012 in order to avoid a huge capital gains tax.

From 1St Jan, The long-term capital gains taxes will rise. It will be 3.8% higher for top rank earners to facilitate more funds to The President’s overhaul of U.S. health care. Obama is planning to raise the rates more by 5 percentage points, to 23.8 percent.

According to Buffett, he and Munger have “mixed emotions” to repurchase stock from long-term shareholders at a price, below the intrinsic value of the company. Buffett named such investors as partners.

Berkshire Hathaway Inc. (NYSE:BRK.A) has always concerned about its shareholders. They do not want their shareholders to sell the shares at a discount price. Berkshire Hathaway Inc. (NYSE:BRK.A)’s deal gives the shareholders a better position to dispose their holdings at good prices. The company always wants the shareholders to be well informed about its financial position. They should be well educated about the value of the assets they are selling.

From the end of October through yesterday, Berkshire Hathaway Inc. (NYSE:BRK.A) shares traded about $130,000. On Nov. 27, the stock reached almost $133,000.

Berkshire Hathaway Inc. (NYSE:BRK.A) was up by 0.15% to close at $134,200.00.

Published by Viraj Shah

Viraj Shah has done M.Com (Finance) and currently pursuing CFP. He is a technical analyst who tracks US markets along with other global markets like India very closely. He is very passionate about stocks and believes that money can always be made in market.



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