Post by stevpot99 on Jul 10, 2004 2:40:19 GMT -5
CMKX - When Buybacks Make Sense, by Warren Buffett
Posted by: Bo14172
In reply to: None Date:7/9/2004 12:42:36 AM
Post #of 6475
CMKX - When Buybacks Make Sense, by Warren Buffett
Berkshire Hathaway Chairman Warren Buffett has written extensively on the proper use of share buybacks in his annual shareholder letters, demonstrating his fondness for companies that engage in share buybacks when shares are significantly undervalued. The following is taken from his 1984 letter (I have edited it slightly because of space considerations):
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. As shareholders, we find this encouraging and rewarding for two important reasons. The obvious point involves basic arithmetic: major repurchases at prices well below per-share intrinsic business value immediately increase, in a highly significant way, that value. When companies purchase their own stock, they often find it easy to get $2 of present value for $1.
The other benefit of repurchases is less subject to precise measurement but can be fully as important over time. By making repurchases when a company's market value is well below its business value, management clearly demonstrates that it is given to actions that enhance the wealth of shareholders, rather than to actions that expand management's domain but that do nothing for (or even harm) shareholders. Seeing this, shareholders and potential shareholders increase their estimates of future returns from the business. This upward revision, in turn, produces market prices more in line with intrinsic business value.
________________________________________________________________
In the case of CMKX, I'm am not speculating this as what will occur. However, after seeing "Diamond Mines" last nite, I better understand the magnitude of this industry and the history of companies buying back shares to go private, or be open to a buyout from larger players, such as Debeers. In doing research tonight, I found Mr. Buffett's piece wonderfully similar to a position CMKX be at in the near future.
The position CMKX will face has always boiled down to only 2 points. All the other talk, rumor and speculation simply carries no weight. These 2 factors I mention are THE PRIMARY forces of pps and company value.
First is the Outstanding shares (which is defined as the issued shares less those held by insiders of the company). This will be known in due course, and likely soon.
Next is the value of that land and those claims owned by CMKX.
Prior to the magnetic survey being done, the geologist for CMKX estimated a $40 billion dollar figure. I am more than curious as to what his and other geologist's thoughts are on value in light of this survey.
Once Outstanding shares are known and a value is placed on the company's holdings, the market should reflect the proper share price. If it doesn't, then I contend Mr. Buffett's theory would then come into play as a consideration of CMKX to buyout our shares at a premium to the market price at the time, OR a bid is made for our shares at a premium by a competitor.
I'm going to call it a night and won't be on tomorrow other than very late afternoon, but when I am on again, remind me to copy a post I read earlier this week which was outstanding in listing the REAL events to expect to see and likely occur over the next 2-3 months. The events are tied to either O/S or company value. It is those 2 issue which will drive the market price and value of CMKX. Be well. Bo
Posted by: Bo14172
In reply to: None Date:7/9/2004 12:42:36 AM
Post #of 6475
CMKX - When Buybacks Make Sense, by Warren Buffett
Berkshire Hathaway Chairman Warren Buffett has written extensively on the proper use of share buybacks in his annual shareholder letters, demonstrating his fondness for companies that engage in share buybacks when shares are significantly undervalued. The following is taken from his 1984 letter (I have edited it slightly because of space considerations):
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. As shareholders, we find this encouraging and rewarding for two important reasons. The obvious point involves basic arithmetic: major repurchases at prices well below per-share intrinsic business value immediately increase, in a highly significant way, that value. When companies purchase their own stock, they often find it easy to get $2 of present value for $1.
The other benefit of repurchases is less subject to precise measurement but can be fully as important over time. By making repurchases when a company's market value is well below its business value, management clearly demonstrates that it is given to actions that enhance the wealth of shareholders, rather than to actions that expand management's domain but that do nothing for (or even harm) shareholders. Seeing this, shareholders and potential shareholders increase their estimates of future returns from the business. This upward revision, in turn, produces market prices more in line with intrinsic business value.
________________________________________________________________
In the case of CMKX, I'm am not speculating this as what will occur. However, after seeing "Diamond Mines" last nite, I better understand the magnitude of this industry and the history of companies buying back shares to go private, or be open to a buyout from larger players, such as Debeers. In doing research tonight, I found Mr. Buffett's piece wonderfully similar to a position CMKX be at in the near future.
The position CMKX will face has always boiled down to only 2 points. All the other talk, rumor and speculation simply carries no weight. These 2 factors I mention are THE PRIMARY forces of pps and company value.
First is the Outstanding shares (which is defined as the issued shares less those held by insiders of the company). This will be known in due course, and likely soon.
Next is the value of that land and those claims owned by CMKX.
Prior to the magnetic survey being done, the geologist for CMKX estimated a $40 billion dollar figure. I am more than curious as to what his and other geologist's thoughts are on value in light of this survey.
Once Outstanding shares are known and a value is placed on the company's holdings, the market should reflect the proper share price. If it doesn't, then I contend Mr. Buffett's theory would then come into play as a consideration of CMKX to buyout our shares at a premium to the market price at the time, OR a bid is made for our shares at a premium by a competitor.
I'm going to call it a night and won't be on tomorrow other than very late afternoon, but when I am on again, remind me to copy a post I read earlier this week which was outstanding in listing the REAL events to expect to see and likely occur over the next 2-3 months. The events are tied to either O/S or company value. It is those 2 issue which will drive the market price and value of CMKX. Be well. Bo