Buffett Defends Buybacks

Even though stock buybacks have come under fire in Washington, famed investor Warren Buffett says they make "nothing but sense." In fact, Buffett announced that Berkshire Hathaway would repurchase some of its stock. Although a company can distribute money to shareholders through dividends as well, Berkshire is noted for having paid only one dividend in its history, in 1967. Berkshire recently changed its buyback policy. Previously, a buyback could only occur if the repurchase price did not exceed 1.2 times the book value. Now, the company can undertake a buyback if Buffett and his partner, Charlie Munger, believe the stock is selling below its intrinsic value.