Gustavo Ballvé on December 23rd, 2012
Corporate Governance, Food for thought, Home, Investment Themes, Portfolio Management, Risk management, Signal or Noise

It’s been a while since my last post, mainly because of a lot of work – but also because of another worthy task: raising money for a school in the community of Loharano in Madagascar. But you can read about that here, so moving on to a subject that caused way more noise than called for: Buffett’s US$ 1.2 billion buyback of BRK/A shares. The fact that he bought it from one selling shareholder and that he raised the share price limit had some writers overreacting. Links inside.

A good starting point is our own post on share buy-backs from November 2011.

This Gurufocus.com story summarizes the buy-back, the criticism and the counter-arguments, but does so in a very useful way: he looks at what Buffett wrote about buy-backs in the annual letters to Berkshire shareholders… and he does that search going back a few decades. Great stuff.

ValueWalk.com had two pieces, one highlighting Whitney Tilson’s educated guess as to who was the selling shareholder (and his responses to the criticism), another with Buffett’s response to the article criticizing him. Only rarely has Buffett responded to criticism, so you can tell he was annoyed. There was even a Financial Times LEX article on the subject, ending on a sour (yet not exactly correct) note, which I try to summarize here: “if the only bargain super-investor Buffett can find is in his own shares, what are we mere mortals to do?”

Three main arguments:  One, we could look into buying Berkshire shares along with him. Two, Buffett has restrictions due to Berkshire’s amazing size, so his “not finding ideas” has a lot to do with the small universe of his investable ideas. Three, paraphrasing Charlie Munger, not doing anything (i.e. waiting for better opportunities) is better than doing something stupid…

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