By Jonathan Stempel and Trevor Hunnicutt
(Reuters) - Berkshire Hathaway Inc
The new policy lets Buffett and Vice Chairman Charlie Munger authorise stock buybacks when both believe the repurchase price is "below Berkshire's intrinsic value," a determination they said would be made "conservatively."
Berkshire's former policy said repurchase prices would not exceed 1.2 times book value per share.
Its class A shares closed Tuesday at $288,500, roughly 1.37 times its book value per share of $211,184 as of March 31. Berkshire's class B shares rose 1.5 percent in after-market trading.
The new policy would be a major change for Berkshire Hathaway, which has been under pressure in recent years to put more than $108 billion of cash and similar safe assets to work, or consider returning that money to its shareholders.
"It's a somewhat significant change," said Steven Check, president of Check Capital Management Inc in Costa Mesa, California. Berkshire shares comprise about 20 percent of its $1.5 billion of assets.
"This is a good thing in an environment where Berkshire has a lot of excess cash, nothing to buy, and an underpriced stock," Check said.
Buffett, known as a bargain-hunter, has acknowledged difficulty finding companies he can buy at a reasonable price. When asked at its shareholders' meeting in May about Berkshire's use of its cash, Buffett resisted the idea of issuing a special dividend to pass it on to shareholders.
At that meeting, he said he supported a move by Apple Inc
On Tuesday, Berkshire said it would not buy back stock under the new policy until it releases second-quarter results, scheduled for Aug. 3.
Berkshire also affirmed its policy of not repurchasing stock if doing so would reduce the value of Berkshire's cash and equivalents below $20 billion.
(Reporting by Jonathan Stempel and Trevor Hunnicutt in New York, Editing by Rosalba O'Brien and Richard Chang)
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Updated Date: Jul 18, 2018 06:05 AM