In November 2007, hedge fund manager Leon Cooperman sent Warren Buffett two presentations he was preparing to give at the Value Investing Congress.
One of Cooperman’s slidedecks was highly critical of stock repurchases and the way it was being practiced by companies at that time. In the presentation, he used Loews as an example of a company that has a good buyback program.
The other presentation was entitled “A Case Study In Financial Brilliance” and it focused on Dr. Henry Singleton, the founder of Teledyne and “arguably the smartest guy” Cooperman ever met. He noted that he spent the first 25 years of his career studying Teledyne.
“I have no greater authority — to that view — than Warren Buffett,” Cooperman said on Bloomberg View’s Barry Ritholz podcast. Buffett is someone who has influenced Cooperman’s own investing.
Buffett responded to Cooperman’s presentations. Cooperman shared the contents of the letter he got on air with Ritholtz, noting he hopes Buffett doesn’t mind him reading it publicly.
By the way, you could hear Cooperman rummaging through his file folder to retrieve the letter. It appears that he carries the letter on him.
Here’s a transcript based on what Cooperman read aloud (emphasis ours):
November 23, 2007
I don’t think you could have picked two better subjects. Henry is a manager that all investors, CEOs, would be CEOs, and MBA students should study. In the end, it was 100 per cent rational and there are very few CEOs about whom I can make that statement.
The stock repurchase situation is fascinating to me. That’s because the answer is so simple. You do it when you are buying dollar bills at clear cut and significant discount and only then.
As a general observation I would say that most companies that repurchased shares thirty years ago were doing it for for the right reasons and most companies doing it now are wrong when doing so. Time after time, I see managers who are attempting to be fashionable or subconsciously hoping to support their stock. Loews is a great example of a company that’s always repurchased shares for the right reasons. I could give examples of the reverse, but I follow the dictum praise by name, criticise by category.
“And I showed that letter to my two sons. And it’s a great philosophy of life. You never see Warren criticise any one individual in public. But he might criticise investment bankers. He might criticise hedge funds. But he doesn’t go after anyone. And that’s a good philosophy of life, in my opinion,” Cooperman told Ritholtz.