Buffett is reading my blog and agrees with me

Two months ago, I wrote:   Buffett’s company, Berkshire Hathaway, is the most expensive stock in the world. Its A share is traded at $107,300 per share. But from the valuation perspective, it is very cheap actually and you should buy it if you can afford.

I thought Berkshire Hathaway (BRK) was cheap and was a good buy. It seems Buffett is reading my blog and agrees with me by announcing that Berkshire will buy back its own stocks when the share price is within 110% of its book values. Clearly Buffett thinks his company is too cheap at the current price. A few things worth attention:

-  Buffett has never bought back his own stocks in the past 40 years since he founded this company. In 2000, he once also made a similar announcement for share buyback when BRK-A share was $50K-60K. But immediately its share price jumped above the level he was interested in to buy and he never got a chance to implement the buyback plan. So this is the first time if he is really able to buy back. Buffett is a super value investor and the best one in the world. If he thinks his company is cheap, it must be dirty cheap. It is so cheap that he cannot find anything better that he will take this historical action.

- Buffett has $77 billion cash or cash equivalent. He said he will not buyback share if the cash drops below $20 B. So he has about $57B to buy his own stock shares, a monstrous amount of money to support the stock price.

- Berkshire has over 70 companies under its control. It is almost like a mutual fund but managed by the greatest investor. Buffett must be very confident about the business prospects of these companies and thinks they will be doing greatly in the next few years.

While anything could happen and in theory Berkshire share price may also go down to zero, in reality it is impossible. Now with Buffett’s buyback plan, BRK will have a floor to stand. Its book value for its A share is about $98,000 as of end of June. So for B share (1/1500) it is about $66. Buffett will buy its shares if it drops within 110% of the book value. So the floor for Berkshire B shares (BRK-B) should be at around $72. I think buying BRK-B around $70 is cheap and safe.