I sold a couple of Berkshire Hathaway puts (strike 65, Jan 2013). I got in average 700 US$ for each. I think that a price of 58 (65-7) for class b stocks is quite below the point where Buffett would start buying his own stock, actually he has already started buying at much higher levels, you can see that in his interview today (part of a transcript is here below). He mentioned he was doing the paper work just now, so I guess he bought very recently and he could not have bought much cheaper than today’s price because since the buyback was in place and announced the stock jumped to current levels.
I see this as a very low risk transaction, I would really not mind having to buy at much lower prices if the put is assigned, since I was already adding mor of its stocks @66-67. Its my bigger position and would gladly triple it at the right price. This is probably the only company I feel comfortable by selling puts, it’s the one I know the more about, it has the right price plus an “insurance” from Buffett that he will buy if the stock is below its book value, even if he does not buy, just the expectation he would do it could keep the price high.
Note that I do not think, like many in the media say, that this is because he cannot find other opportunities: not so long ago he spent 9 billions on Lubrizol; he just announced a 400 million insurance deal yesterday; he made a 5 billion deal with Bank of America a few weeks ago; and now in the third quarter he bought 4 Billions in common stocks increasing the size of his common stocks portfolio by 8%! He has a lot of opportunities! Announcing he would buy his own shares if the price is right is just another opportunity more, at the right moment. It is, he said, one of the few times that the price is so attractive and since the markets are so volatile the timing of the announcement seems perfect.
If he had announced this in normal times the stock would have skyrocketed and it actually did the last time he announced a buy back, now, with the markets as they are, he might have a chance to make his announcement come true, and I also hope that the market stays like this, or worse, so that I can buy more too !
ANDREW: I want to get to you in a second and this anniversary, but I also want to get to buybacks, which are in the news this week. You just announced it. Why do it now? I think there’s a big question, Buffett watchers who’ve seen you over many years, you have not always liked buybacks. So what is it about what’s going on right now?
WARREN BUFFETT, Berkshire Hathaway CEO: Price to value. I mean, the only — the only time to do buybacks, in my view, is when you think your stock is selling well below its intrinsic business value. And we talk— we’ve talked about that in many annual reports over the years, and we haven’t had very many opportunities to do it. Now we think that…
ANDREW: OK. So you’ve instituted the program, but the big question that viewers want to know is, have you actually started buying yet?
BUFFETT: We actually have.
ANDREW: You have started buying yet.
BUFFETT: Yeah, yeah.
ANDREW: OK. And how much can we expect for you to buy? I know you said that you wanted to keep a $20 billion kitty at all times. You have about $40 billion on hand right now.
BUFFETT: Yeah. Well, we don’t have quite that much, but the cheaper it is, the more aggressive, generally, we will be in terms of buying. It’s just like buying any other stock.
ANDREW: And how much have you bought so far?
BUFFETT: We only got the paperwork done yesterday.
ANDREW: OK. And what does this say, and then I want to get to Cathy, what does this say more in a larger picture about your ability to find elephants? You always talk about your trigger finger.
BUFFETT: That’s what I’m looking for.
ANDREW: Well, I know that, but in terms of moving money into your own stock, does it mean that you’re not finding the same kind of opportunities right now, given the markets?
BUFFETT: We find opportunities periodically. I mean, we did the BofA deal, we did Lubrizol, we put 9, almost $9 billion in Lubrizol. We just announced yesterday a $400 million acquisition for an insurance company. Just yesterday. We’ve bought, in the last quarter, the third— in the current quarter, we bought net 4 billion of common equities, which was similar to the total amount we bought in the first half. The cheaper stocks get, the better I like to buy them, whether it’s our stock or somebody else’s.
ANDREW: So there’s still— there’s still— we should still see you make a big deal.
ANDREW: And this is not…
BUFFETT: I sure hope so.
========= Weekly transactions ==========
SLD 1 BRK B JAN 18 ’13 65 Put Option 7.45 USD AMEX SEP 30 15:27:50 1.04
SLD 1 BRK B JAN 18 ’13 65 Put Option 6.45 USD NASDAQOM SEP 27 13:19:27 0.83