Warren Buffett’s determination that Berkshire Hathaway Inc. shares are cheap enough to buy back may mean the Standard & Poor’s 500 Index is also a bargain.
The company is authorized to repurchase stock for the first time in four decades as long as its price is less than 1.1 times book value, or assets minus liabilities, according to a statement yesterday. The level is 29 percent below Berkshire’s average of 1.55 since 2000, almost the same discount investors are getting in the S&P 500, according to data compiled by Bloomberg. Shares of Omaha, Nebraska-based Berkshire fell to $100,000 for the first time in almost two years on Sept. 22.
Declines that have erased about $2.8 trillion from the value of American equities in the last two months are luring Buffett, who said his company spent more to buy stocks on Aug. 8 than any other time this year. The S&P 500 tumbled 6.7 percent that day and has lost 15 percent from its 2011 high on April 29, driven down by concerns Europe’s debt crisis will spread and shrink the global economy. The benchmark index rose 2 percent to 1,186.49 at 10:09 a.m. New York time.
“If he thought the possibilities of a recession were on the horizon, then he’d wait to do this,” James Dunigan, who helps oversee $109 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “You can make a number of arguments that on some traditional measures, the market is undervalued.”
Read more at http://www.bloomberg.com/news/2011-09-27/buffett-buyback-shows-s-p-500-passes-berkshire-book-value-test.html
No comments:
Post a Comment