Warren Buffet On Share Buybacks17 Jan 2020 20:10
Basically, if you believe a stock is undervalued (and based on Centamin's output growth potential, reserve growth potential, dividend growth potential I believe we are undervalued ) you buy (to cancel - obviously) A rising share price adds confidence, builds momentum and
encourages more investors to buy your stock — thus the increase in popularity is what grows market cap.
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Buybacks, when done right, are a value investment
Unlike dividends, which are typically implemented with the understanding that they will always be paid to shareholders unless there is a dramatic change in a business’s situation, buybacks offer management the opportunity to do what Buffett likes best: buy undervalued stocks.
In discussing why opportunistic buybacks are better than perennial dividends, Buffett told CNBC in February 2018, “The best chance to deploy capital is when things are going down.”
That echoes what he said this week on CNBC about a 10 percent decline in Apple being a good thing, because it means management would likely buy more stock.
In a 2015 interview with CNBC, Buffett said, “Many management are just deciding they’re gonna buy X billions over X months. That’s no way to buy things. You buy when selling for less than they are worth. ... It’s not a complicated equation to figure out whether it is beneficial or not to repurchase shares.”
“Anytime you can buy stock for less than it’s worth, it’s advantageous to the continuing shareholders ... but it should be by a demonstrable margin,” he said.
Buffett’s comments this week echo what he has said over the years about the powerful effect buybacks have on stock ownership. As far back as the 1996 Berkshire annual meeting, Buffett explained one of the greatest benefits of stock buybacks to shareholders: You don’t need to spend a dime to increase your percentage of shares held.
Buffett said back in 1996 that he has “enormous respect for the power of a really outstanding business. And we recognize how scarce they are. And if a management wishes to further intensify our ownership by repurchasing shares, we applaud.”
Berkshire vice chairman Charlie Munger said mergers often lead to a decrease in value. “Generally speaking in America, when companies go out hell-bent to buy other companies, they do — they’re worth less after the transaction is made than they were before... I think that a great many places have nothing better to do than to buy in their own stock, and nothing as advantageous to do as they can — as buying in their own stock.”
“We’d rather have a company whose stock is undervalued buying back stock but the trouble is if you pay a dividend you’re not going to eliminate it,” Buffett said, using Apple as an example.
“The best use of cash, if there is not another good use for it in business, if the stock is underpriced is a repurchase.”
https://www.cnbc.com/2018/08/31/warren-buffett-explains-the-enduring-power-of-stock-buybacks.html
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