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No. of Recommendations: 8
You are absolutely right. In fact even if we deployed our entire $100B for buy backs and managed to do it carefully enough to retain an average 20% quotation discount to intrinsic value, then we would only increase intrinsic value per share by a little over 3.6%.*

No, that is not the way you look at an investment. At an average discount of 20% to intrinsic value, an investment of $100b in buybacks has an immediate return on the investment of 20% or $20 billion dollars, in value. The logical reason, if you care about performance per share to NOT buy back at 20% discount to IV is that you expect to deploy the cash in something even better than that.

Although Buffett has said things that make it sound like he cares about performance per share, I do not think that that is the only thing he cares about. I think he is interested in maximizing the value of Berkshire Hathaway. In which case, buybacks work against you: you are shrinking the company, decreasing its total intrinsic value even as you increase its intrinsic value per share. This is not the masterpiece Buffett is creating.

I think successor managers after Buffett will care more about value per share and so will move the pieces around in such a way as to see intrinsic value fall more completely to the shareholders. I'm actually bullish on holding through the transition.

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