Buffett backs Bank of America, buying more stocks 30 Sep 11

Berkshire Hathaway chairman and CEO Warren Buffett walks to lunch during a break on the first day of the Allen and Company Sun Valley Conference in Sun Valley, Idaho July 6, 2011

Fri Sep 30, 2011 12:44pm EDT

(Reuters) – Warren Buffett said on Friday he is still eager to buy companies and stocks, even as his conglomerate Berkshire Hathaway launches its first-ever share buyback program.

Buffett, in a CNBC interview, said the repurchases will not stop the company from making acquisitions or spending on infrastructure for its portfolio of companies.

The “Oracle of Omaha” also reiterated his support for Bank of America Corp even as he acknowledged it will take the bank time to solve its problems.

Buffett said Berkshire bought a net $4 billion of common stock on the market in the third quarter as sharp declines presented opportunities to invest cheaply.

But it is the investment in its own shares that stunned the market. Berkshire announced the program Monday, saying it would pay up to 10 percent above book value for stock. Investors said the program meant Berkshire was probably undervalued by 30 percent or more.

Buffett said the paperwork to start the buybacks was completed on Thursday.

Berkshire Class A shares were down 0.9 percent at $108,202 in afternoon trade on Friday, in line with broader market declines, though the stock is still up sharply from the pre-buyback levels of late last week.

BACKING BofA

While Berkshire has said it could spend heavily on shares, Buffett said on Friday the company would still make acquisitions and would end up spending $7 billion this year on plant and equipment for its portfolio of companies.

As he has all year long, he said such investments were a bet on the economic strength of the United States. “It’s very, very unlikely we’ll go back into a recession,” Buffett said.

That confidence was part of his reasoning for the deal with Bank of America, which gave him a lucrative dividend and a pile of unusually long-lasting warrants as well.

Bank of America is “a fabulous business, but it’s got a lot of problems from the past,” he said, acknowledging that CEO Brian Moynihan will need years to fix them.

Bank of America is cutting 30,000 jobs in the first phase of an expense reduction program called “New BAC,” a play on the company’s ticker symbol. The bank is also shedding assets to raise capital to meet new industry standards that begin to take effect in 2013.

Buffett was on the NYSE floor to help mark the 50th anniversary of his portfolio company, Business Wire, yet he is also in New York to host a fundraiser for President Barack Obama, who has adopted his plan for the rich to pay a higher rate of tax than they do now.

Buffett — who said the White House had asked for permission to put his name on the plan — estimated that about 50,000 people nationwide would pay more taxes under the proposal.