Decatur, Illinois-based Archer-Daniels-Midland Co., the biggest U.S. grain processor, Goldman Sachs, the New York-based securities firm, Chicago-based CME Group Inc., the largest futures exchange operator, and 89 other companies have price-to- book multiples below 1.1, the data show. Excluding intangible assets, such as goodwill, 47 of the 500 companies in the benchmark U.S. equity gauge meet the criteria.
"It could be argued that if the market is cheap in his view, he could find something else to buy instead of his own stock, since making timely acquisitions was the way he built up his company in the first place," Shaoul wrote in an e-mail. "I am sure that is the question most people are asking."
Comparing a stock's price to book value may not be the most reliable valuation technique because assets reflect estimates that may not prove accurate, Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital in Indiana, Pennsylvania, said in a telephone interview.
"Analyzing book value is a difficult way to determine the relative worth of a company," he said. "It's because of a lot of intangibles that you really don't know what the value is. It'll give you an idea about the trend."
The S&P 500's book value fell from about $533 a share in May 2008 to $442 a share in March 2009, monthly data compiled by Bloomberg show. The decline occurred as banks and financial companies were in the process of writing off more than $2 trillion in loans tied to subprime mortgages, the data show.
Lowering the S&P 500's price-to-book ratio to match Berkshire's would cut the index's price by 42 percent, data compiled by Bloomberg show. The benchmark gauge for American equity has combined book value of $611.38 a share, based on the most recent filings of its companies. Cutting the multiple from 1.9 to 1.1 would send the S&P 500 to about 673 from 1,162.95, according to data compiled by Bloomberg.
Berkshire's Class A shares dropped 17 percent to $100,320 apiece in 2011 prior to the buyback announcement. They were trading at 16.3 times earnings as of Sept. 22, the lowest price- earnings ratio of 2011, according to data compiled by Bloomberg.
"The underlying businesses of Berkshire are worth considerably more than this amount," the company said yesterday in a statement. "If we are correct in our opinion, repurchases will enhance the per-share intrinsic value of Berkshire shares."
Railroad Acquisition
Buffett bought railroad Burlington Northern Santa Fe last year for $26.5 billion in what he described as an "all-in wager" on the U.S. economy. In July, Buffett told Bloomberg Television he expected economic growth to continue and would "bet very heavily" against a second recession in three years.
Buffett said his company spent more on stocks on Aug. 8 than any day this year, when the S&P 500 tumbled 6.7 percent, the most since December 2008. "I like buying on sale," he said in an Aug. 15 interview with Charlie Rose broadcast on PBS.