1997: Would Berkshire repurchase shares in a market downturn?
AUDIENCE MEMBER: If Mr. Market goes in the depressed phase that Berkshire Hathaway has got an investment portion of its book value about 28,000 per Class A share, that would put that Berkshire Hathaway share much lower than what it is now. Would Berkshire Hathaway consider buying back its own share? Or has it done so in the past? Or is it out of the question?
WARREN BUFFETT: If the market went in the tank, Berkshire stock would go in the tank, too. And so there shouldn’t be anybody in this room that owns the stock that would not find it palatable, if not become positively enthusiastic, about the stock going down 50 percent.
It would not bother Charlie. It wouldn’t bother me, because we would have very intelligent things, then, to do with whatever capital we came into. And we would be generating capital as we went along.
We wouldn’t have sold our Coke. We wouldn’t have sold our Gillette. We wouldn’t have sold our businesses. So most of our capital would’ve ridden that down. But at least, we would have intelligent things to do with the money.
One of the intelligent things, possibly, could be to buy in our own stock. But that would imply that our own stock was cheaper relative to value than anything else we could find among possible opportunities. And the chances are we could find things that were more attractive.
Back in 1973 or ’4, when we were buying Washington Post at a fraction of what it was worth, Berkshire stock may have been cheap then. But it wasn’t as cheap as the Washington Post.
In 1987 or — well, in 1988 and ’89, you know, Berkshire stock may or may not have been cheap. But it wasn’t as cheap as Coca-Cola.
And it’s unlikely that among the thousands of the possible investments that Berkshire will be the most attractive at any time. But if it were, you know, obviously, we would buy in our own stock.
But I think if the Dow went down 50 percent, we would have plenty of interesting things to do. And we would not be unhappy.
Charlie?
CHARLIE MUNGER: Yeah. We don’t have any rule against it. Opportunity cost is the game around here.