Warren Buffett

Warren Buffett Defends Stock Buybacks

(BRK.A), (BRK.B)

In his Berkshire Hathaway Chairman’s Letter that opens the Berkshire Hathway 2022 Annual Report, Warren Buffett took umbrage with politicians and other voices that attack corporate share repurchases. He wrote:

Gains from value-accretive repurchases, it should be emphasized, benefit all owners – in every respect. Imagine, if you will, three fully-informed shareholders of a local auto dealership, one of whom manages the business. Imagine, further, that one of the passive owners wishes to sell his interest back to the company at a price attractive to the two continuing shareholders. When completed, has this transaction harmed anyone? Is the manager somehow favored over the continuing passive owners? Has the public been hurt?

When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).

In 2022, Berkshire repurchased a modest 1.2% of the company’s outstanding shares.

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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