Investors often look for companies that are aggressive in
repurchasing their own shares.
) is no exception. He sees two primary benefits of the practice:
- It increases his ownership percentage in the companies.
- It demonstrates that management has a proclivity for serving
He has one qualification though - that managements repurchase
shares at the right price. In his 1984 shareholder letter, he says:
"The companies in which we have our largest investments have all
engaged in significant stock repurchases at times when wide
discrepancies existed between price and value."
Buffett's share of two of his "Big Four" investments at Berkshire
)(BRK.B) expanded in 2013 due to strategic share repurchases.
According to the GuruFocus All-In-One Screener, one of his holdings
has repurchased shares at an extraordinarily high rate.
Coca-Cola increased Buffett's ownership of the company from 8.9% to
9.1% in 2013 due to share repurchases. Buffett notes that such
incremental increases are not negligible. "If you think tenths of a
percent aren't important," he wrote in his 2013 letter, "ponder
this math: For the four companies in aggregate, each increase of
one-tenth of a percent in our share of their equity raises
Berkshire's share of their annual earnings by $50 million."
Buffett's ownership in Coke continuously increases although he has
not actually purchased an additional share in the years that he has
owned it. He owns 400 million shares in total, comprising 15.8% of
Coke has a three-year share buyback rate of 1.1%. This ranks higher
than 83% of the 60 companies in the Global Beverages - Soft Drinks
industry, where the median is -0.40.
In 2013, the company repurchased $3.5 billion of its shares, at the
high end of its projected $3.0 billion to $3.5 billion. The 121
million shares in 2013 were purchased at an average price of
$39.84, up from the same amount of shares purchased for $37.11 on
average in 2012. A year prior, in 2011, it repurchased 127 million
shares at the average price of $33.73.
For 2014, Coke expects to lower its target range to between $2.5
billion and $3.0 billion, meaning Buffett's stake in the company
will continue to increase.
Coke authorized its first share repurchase program in 1984 and is
currently under a 500-million share repurchase program it
authorized in 2012. During that period, it has bought back 3.1
billion shares of its common stock, at the average price of $13.82
American Express (
Buffett's equity in American Express grew from 13.7% to 14.2% in
2013. His third largest position, he has also watched his ownership
of this company grow without spending money on actually buying any
new shares. He holds 151,610,700 in total, an equivalent of 13.1%
of his portfolio.
American Express repurchased shares over the past three years at a
rate of 3%. This ranks them higher than 90% of the 93 companies in
the Global Credit Services Company, where the media rate is -1.3%.
American Express shares outstanding history:
Amex spent $3.94 billion repurchasing 55 million shares last year,
at an average price of $72.51. This is down 20% from the 69 million
shares it repurchased in 2012, at a cost of $3.95 billion. The last
two years saw much more aggressive purchasing than normal, as in
2011 it spent $2.3 billion repurchasing 48 million shares.
Combined with dividends, Amex in 2013 returned 81% of its generated
capital to shareholders. Its goal as stated in its recent annual
report is to return 50% of its generated capital to shareholders as
repurchases or dividends, if it achieves its laid out EPS and ROE
targets of 12% to 15% growth and 25% or more, respectively. It
returned more in 2013 mainly on the strength of its capital ratios
and net income, compared to the capital required to support its
If all goes well with the capital plan Amex submitted to the
Federal Reserve in January 2014, it will embark on a $1 billion
share repurchase in the first quarter of 2014. It expects a Fed
response by March 31, 2014.
As of Dec. 31, 2013, the company has 108 million shares remaining
under its March 2013 repurchase authorization, which has no
Another Buffett company dedicated to reducing its share count is
DirecTV. His ninth largest holding, it was actually purchased by
his two fund managers at Berkshire and was the first of theirs to
reach a total value over $1 billion.
Berkshire owns 37,514,700 shares of the company as of the fourth
quarter of 2013, equal to 2.4% of the portfolio and 4.2% of the
company, up from 3.8% of the company in 2012. Their holding
The company repurchases shares at a prodigious rate. At 2014 it had
almost 1.4 billion shares outstanding, and a decade later has just
526.0 million. Its five-year share buyback rate is quite high, at
DTV's repurchases of the recent eight years came at a cost of $29.7
billion. Over that period to Dec. 31, 2013, it retired 65% of its
shares. All of the money the company has returned to shareholders
in the past five years has been in the form of repurchases, as it
has not paid a dividend since then and has no plans to in the
The latest DTV authorization occurred in February 2014, in the
amount of $3.5 billion. This reflects a diminishing rate of
repurchases at the company. In 2013 it spent $4.0 billion, in 2012
it spent $5.15 billion, and in 2011 $5.5 billion. The company's
price, however, has also been going up. On average, it was $57.54,
$48.24 and $45.78 in 2013, 2012 and 2011, respectively.
To see more Buffett stocks rapidly buying back shares, use the
settings on the All-In-One Screener here. Also, peruse Berkshire's
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