1995: Why doesn't Berkshire buy back its shares?

AUDIENCE MEMBER: Christopher Jones (PH) from Scottsdale, Arizona. I had a couple of questions for you.

You’ve mentioned several times today about the difficulty and the frustration that you both have in trying to find capable companies to acquire, or acquire parts of, in the United States.

And I realize that, of course, when we own Coca-Cola and Gillette we are a part of the global environment.

But it’s surprising to me that there haven’t been any global franchises or global managements that have been interesting to either of you that — and I realize, in the past we’ve owned some pieces of some.

So, I was — questioned, because of the size of Berkshire now, might we see something more of a global flavor to the portfolio?

And second question, you’ve also addressed the intelligent use of cash as something that you look for in management.

Many management teams now are buying back their own shares because they can’t find anything cheaper or better in the marketplace.

Does your current philosophy of not buying back your own shares suggest that maybe you think Berkshire’s overpriced at these prices?

WARREN BUFFETT: Well, we have never bought back shares. I — we actually bought a few back in the ’60s — but we basically have never bought back shares, although there were plenty of times when we thought it would be quite attractive to do it.

But we’ve also felt that if we could create more than a dollar of market value by — and maybe well over a dollar of market value — by retaining a dollar, that on balance that that would work out better over time.

As long as we can find ways to use the cash, which, overall, we feel will turn dollar bills into something larger than dollar bills, we will — we’ll keep retaining the money.

And we won’t measure that on whether we can find anything this week or this month, but we’ll certainly measure it based on whether we can find anything in a couple of years, always.

We’ve had dry spells. Actually, right now, there’s a little more going on than usual. But we’ve had dry spells a lot of times over a 20-odd year period. And you know, as I said, I wound up the partnership during one dry spell.

So that — it will be measured — it’s measured partly on what’s going on now, and it’s measured partly on the expectancy.

And I don’t think, whether our stock was selling at X or three-quarters of X right now, would make a lot of difference. But it would make a difference if we thought we couldn’t find things to do with the money externally.