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Not to knock Buffet, but his views came about due to substantial criticism of BRK. Bluntly stated, BRK was sitting on a ton of cash and NOT investing.
Come up with a metric, leave flexibility and a plan that makes sense. Price to book and share buybacks at reasonable prices was his solution.
Cost of capital and capital allocations is just math.
Buybacks, stock options, and investments are ALL uses of capital. Your share example is misleading if one reads the required disclosures of primary and fully diluted earnings. Dividends, buy backs, and options are all uses of capital which have different investor expectations.
Sources of capital being stock or debt or past earnings sitting in the bank (so to speak) a different question.
2007 and 2009 were certainly different capital markets. Issuing stock or debt . Buffet was in a great position, BRK will always keep $20 billion! Not every business has that luxury, thus trim dividends, options and buybacks. Some companies have issued debt and done buybacks. Capital markets and stock markets are two different fields. Focusing on outstanding shares alone or EPS (primary or diluted) is a math formula for disaster.
Buffet attacked his excess cash issue very effectively using and ill defined “intrinsic value”. Very skilled and comes back to BRK’s ability to make value judgements.
Additionally, he mentioned “trimming” positions if you want to create your own dividends. From a capital market standpoint, neither Buffet nor BRK have a need to raise capital in the foreseeable future.
A wise man, but make no mistake he capably talks his book.
Come up with a metric, leave flexibility and a plan that makes sense. Price to book and share buybacks at reasonable prices was his solution.
Cost of capital and capital allocations is just math.
Buybacks, stock options, and investments are ALL uses of capital. Your share example is misleading if one reads the required disclosures of primary and fully diluted earnings. Dividends, buy backs, and options are all uses of capital which have different investor expectations.
Sources of capital being stock or debt or past earnings sitting in the bank (so to speak) a different question.
2007 and 2009 were certainly different capital markets. Issuing stock or debt . Buffet was in a great position, BRK will always keep $20 billion! Not every business has that luxury, thus trim dividends, options and buybacks. Some companies have issued debt and done buybacks. Capital markets and stock markets are two different fields. Focusing on outstanding shares alone or EPS (primary or diluted) is a math formula for disaster.
Buffet attacked his excess cash issue very effectively using and ill defined “intrinsic value”. Very skilled and comes back to BRK’s ability to make value judgements.
Additionally, he mentioned “trimming” positions if you want to create your own dividends. From a capital market standpoint, neither Buffet nor BRK have a need to raise capital in the foreseeable future.
A wise man, but make no mistake he capably talks his book.
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