Berkshire’s Buyback: A Mildly Interesting Development

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It has come to our attention – and, frankly, to the attention of anyone vaguely interested in the accumulation of capital – that Berkshire Hathaway, the conglomerate formerly captained by the legendary Warren Buffett (a man who, incidentally, once correctly predicted the price of chewing gum in 1972 – a feat still baffling economists), has begun repurchasing its own stock. This, in the grand scheme of things, is rather like a very large tortoise deciding to polish its shell. Not essential, certainly, but indicative of… something.

For those unfamiliar with the arcane rituals of high finance, a “buyback” is when a company uses its own money to buy shares of itself. This is, logically, a bit like deciding to have lunch with yourself. It doesn’t fundamentally alter the universe, but it does redistribute the available sandwiches. (Sandwiches being, in this analogy, ownership stakes in the company.)

Buffett, a man who could probably calculate the probability of a slightly used stapler appearing in a parallel dimension, always favored companies that engaged in this practice. He reasoned – and this is where it gets complicated – that if a company believes its stock is undervalued, buying it back is a sensible use of funds. It’s a bit like finding a twenty-dollar bill in an old coat pocket. You don’t necessarily need it, but it’s nice to have. Berkshire, under his guidance, spent a considerable sum on this over the years – a staggering $60 billion between 2020 and 2022. Then, things went… quieter. 2023 saw around $9 billion spent, dwindling to $3 billion in 2024, and then… nothing. A financial pause, if you will. The universe briefly held its breath.

Now, the buybacks are resuming. Why? Well, the company seems to think its stock has dipped to a price that’s… reasonable. It’s a subtle signal, really. A polite cough in the vast auditorium of the stock market. It suggests they believe the market is, shall we say, being a bit silly. (The market, of course, rarely appreciates being called silly. It tends to retaliate with volatility.)

The Price is (Apparently) Right

The rationale, stripped of all the complex financial jargon, is this: fewer shares outstanding mean each remaining share represents a larger slice of the pie. It’s basic arithmetic, really. Unless, of course, the pie is a Klein bottle. In which case, the arithmetic gets… complicated. (Don’t worry about that. We’re just demonstrating the potential for infinite regress.) But, importantly, companies don’t just conjure money from thin air. They use cash or, occasionally, borrow it. So, a buyback is only a good idea if the stock is genuinely undervalued. Otherwise, it’s like paying extra for a slightly dented sandwich.

Here’s a recent look at Berkshire’s market price relative to its tangible book value (TBV) – essentially, the company’s net worth minus all the intangible fluff. Think of it as the weight of the actual, solid gold in Fort Knox, minus the value of the inspirational posters. (The posters are important, naturally, but not for financial calculations.)

As you can see, the ratio has dipped below its five-year average. This, in the highly nuanced language of Wall Street, means the stock might be a bit of a bargain. The Berkshire team, possessing a collective intelligence that likely exceeds the entire population of Luxembourg, will have their own calculations, naturally. But if the price-to-TBV ratio is low, it’s a good indication they’ll start buying. Especially if they’re not finding anything else particularly interesting to buy. (The universe is full of things to buy, but finding the right thing is the challenge.)

So, what does this all mean? It means Berkshire Hathaway believes its stock is reasonably priced. It’s a signal of confidence, a subtle nudge to the market. It’s also, in the grand scheme of things, a perfectly logical, if slightly improbable, event. And in a world increasingly governed by chaos and uncertainty, a little bit of logic is a welcome thing. Even if it involves a very large tortoise and a slightly dented sandwich.

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2026-03-10 00:13