jump to navigation

Buffett’s Problem September 27, 2011

Posted by shaferfinancial in Finance.
Tags: ,
trackback

Warrren Buffett has a huge problem. You see his company has been producing so much cash that he is now sitting on a hoard of cash. He just bought another company Lubrizol for $9B, and is looking at another, Transatlantic, but he still is sitting on $43B in cash. On top of that Mr. Market has lowered the value of Berkshire down to almost book value.

What to do? Well he has told the market that he will repurchase stock at up to 10% above book value [Somewhere around $109,000 per A share]. In his statement he basically says that the stock price is a screaming buy according to his conservative analysis.

Since the announcement the stock has been going up [Now over $110,000] just like it did in 1999 when he made a similar announcement. But what he has done is simply put a floor on pricing for the time being.

Buffett could easily buy $20B of his stock if the price warrants it. That’s alot. And every month Berkshire produces over $1B more in cash!

Are people out there really willing to bet against the skills of Buffet in valuing companies and making good deals?

Advertisements

Comments»

1. gregturn - February 6, 2012

Having too much cash in hand and trying to decide what to do is a problem? I think that is the kind of problem I would like to have!


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: