To The Moon

Chanced upon an article to state that "Grandfather of Value Investing" Warren Buffett is backing back his own stock. In fact for the past 6weeks, he has bought back $1.3 Billion of his own stock. Why so?

Stock is undervalued based on 10X EBT

Based on an historical article in Seeking Alpha, Buffet buys back when the stock is only undervalued and one way of assessing it is using 10X pretax earnings (EBT). Based on the author's estimation in 2021, the IV of $Berkshire Hathaway(BRK.B)$ is at $194. However BRK.B is now at $268.08. So why the buy back? 

I did some snooping with Tiger values using the 10X EBT + Cash and my IV was $192.67. Using the numbers in GF, using EPS instead of EBT, I got $436. If I used the GF number and divided it with 1500 to convert BRKA to BRKB, the GF value was $297.

Stock is undervalued based on PB

Another hypothesis that I came across is that Buffett is buying back based on the rule: if thevalue of BRKA or BRK B drops below 1.2PB, he will buy back. Based on Tiger's valuation of $Berkshire Hathaway(BRK.B)$, the PB is now1.16.

Stock is undervalued based on PE

The final thesis that I came across is that Buffett buys back when the stock is below PE of 12-15 for Berkshire. The current PE is at 7.24 so you know what that means.

Important note

I do not know for sure which method Buffett uses. And also, do note that valuation comes inonly after you have done your due diligence With the industry, management, competition etcetc. Valuation is not an exact science either. One person might like Vincent V Gogh while another might abhor it.

Key point for me is that buybacks needs to be rationalised and bought when the stock is undervalued. Only then can it be shareholder accretive.

As for me, am glad that I fired my initial gunpowder the same time zone that Buffett did. Could we be wrong? Possibly. But I am bullish on $Berkshire Hathaway(BRK.B)$and I know the culture of value investing being built is not going away anytime soon.

What do you think? What's your intrinsic valuecalculation of BRK.B? I like to learn from you.

@MillionaireTiger@CaptainTiger@TigerStars

Also, I like to wish all Dad's a happy Father's Day!