But on page 1 of the annual letter to shareholders is an interesting comment on Berkshire Hathaway. It's here that Warren Buffett repeats his willingness to buy Berkshire Hathaway shares at 1.2 times tangible book value:
"As I've long told you, Berkshire's intrinsic value far exceeds its book value. Moreover, the difference has widened considerably in recent years. That's why our 2012 decision to authorize the repurchase of shares at 120% of book value made sense. We did not purchase shares during 2013, however, because the stock price did not descend to the 120% level. If it does, we will be aggressive."
Why is Buffett channeling his intentions?
This is easily a paragraph that most investors could ignore. But if you know Berkshire Hathaway history, and Buffett's impact on the market, you know that this paragraph means business.
In the 1999 letter, Buffett wrote the following paragraph about share repurchases:
"Recently, when the A shares fell below $45,000, we considered making repurchases. We decided, however, to delay buying, if indeed we elect to do any, until shareholders have had the chance to review this report. If we do find that repurchases make sense, we will only rarely place bids on the New York Stock Exchange ("NYSE")."
Buybacks never followed. In fact, at the 2006 meeting of Berkshire Hathaway shareholders, Buffett said announcing his intentions to repurchase shares sent the price too high.
"A few years ago, when we were willing to buy back our stock, the fact of writing about it eliminated the opportunity."
What's Buffett doing?
One can't help but think repurchases are part of Buffett's succession plans. As the reigns are handed over to his two new money managers, it's likely there may be some loss of confidence in Berkshire's ability to beat the market going forward.
A repurchase policy, instituted by Buffett, allows his successor to repurchase shares at a price deemed attractive by the man himself, Warren Buffett. It acts as a legacy corporate policy that gives his successor all the credibility he or she needs to buy Berkshire shares in bulk at a discount. He put this policy on page 1 for a reason -- people will read it.
The fact that Buffett has so frequently named his price for Berkshire shares implies to me that he's thinking, more than ever, about the future of Berkshire without Buffett at the helm.
With or without Buffett guiding Berkshire, at 1.2 times book value, Berkshire Hathaway becomes a no-brainer investment. Who are we to doubt the world's best investors' valuation of the business he created?