Greenbackd

Warren Buffett took the opportunity Friday to lend his considerable intellectual weight to the debate about buy backs, saying, “I think if your stock is undervalued, significantly undervalued, management should look at that as an alternative to every other activity.”

We’ve been banging the drum for buy backs quite a bit recently. We wrote on Friday that they represent the lowest risk investment for any company with undervalued stock and we’ve written on a number of other occasions about their positive effect on per share value in companies with undervalued stock.

In a Nightly Business Report interview with Susie Gharib, Buffett discussed his view on stock buy backs:

Susie Gharib: What about Berkshire Hathaway stock? Were you surprised that it took such a hit last year, given that Berkshire shareholders are such buy and hold investors?

Warren Buffett: Well most of them are. But in the end our price is figured relative to everything else so the whole stock market goes down 50 percent we ought to go down a lot because you can buy other things cheaper. I’ve had three times in my lifetime since I took over Berkshire when Berkshire stock’s gone down 50 percent. In 1974 it went from $90 to $40. Did I feel badly? No, I loved it! I bought more stock. So I don’t judge how Berkshire is doing by its market price, I judge it by how our businesses are doing.

SG: Is there a price at which you would buy back shares of Berkshire? $85,000? $80,000?

WB: I wouldn’t name a number. If I ever name a number I’ll name it publicly. I mean if we ever get to the point where we’re contemplating doing it, I would make a public announcement.

SG: But would you ever be interested in buying back shares?

WB: I think if your stock is undervalued, significantly undervalued, management should look at that as an alternative to every other activity. That used to be the way people bought back stocks, but in recent years, companies have bought back stocks at high prices. They’ve done it because they like supporting the stock…

SG: What are your feelings with Berkshire. The stock is down a lot. It was up to $147,000 last year. Would you ever be opposed to buying back stock?

WB: I’m not opposed to buying back stock.

You can see the interview with Buffett here (via New York Times’ Dealbook article Buffett Hints at Buyback of Berkshire Shares)