Value-accretive repurchases of stocks benefit all owners: Warren Buffett

“A very minor gain in per-share intrinsic value took place in 2022 through Berkshire share
repurchases as well as similar moves at Apple and American Express, both significant investees
of ours. At Berkshire, we directly increased your interest in our unique collection of businesses by
repurchasing 1.2% of the company’s outstanding shares. At Apple and Amex, repurchases
increased Berkshire’s ownership a bit without any cost to us.”

Revealing this in his FY2022 letter to shareholders dated February 25, 2023, Warren Buffett the legendary investor explained: “The math isn’t complicated: When the share count goes down, your interest in our many businesses goes up. Every small bit helps if repurchases are made at value-accretive prices.”

The repurchases need to be at value-accretive prices. Why?

Warren Buffett put it this way: “Just as surely, when a company overpays for repurchases, the continuing shareholders lose. At such times, gains flow only to the selling shareholders and to the friendly, but expensive, investment banker who recommended the foolish purchases.

“Gains from value-accretive repurchases, it should be emphasized, benefit all owners – in
every respect.”

The sage of Omaha said: “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).”