February 13, 2018

On Tuesday, the S&P 500 was up 0.3% and Toronto was down 0.2%.

TFI International was down 3.1% to $29.75. This company has a strong history of growth by acquisition and is very well managed. But it is in a tough industry. The price decline may be related to news that Amazon will apparently enter the package delivery business. I am tempted to add somewhat to my position on this dip. TFI will report Q4 earnings next Tuesday, after the close of trading.

A comment on a share repurchase announcement:

Phillips 66 (PSX) announces it has agreed to repurchase 35 million shares of Phillips 66 common stock from a wholly-owned subsidiary of Berkshire Hathaway Inc. (NYSE: BRK.A; BRK.B) for $93.725 per share. This $3.3 billion repurchase is expected to close on Feb. 14, 2018.

“We are excited to have this opportunity to return capital to our shareholders in such a meaningful way,”

I probably get hung up on wording at times. Here we have a company buying back shares from exactly one share holder and yet making the technically false statement that this is a return of capital to shareholders (plural). Buffett himself has written about repurchases and points out that the money goes to departing share owners not continuing owners. In this case Berkshire is the only departing share owner but is also a very large continuing share owner.

Berkshire is selling these shares only because they own over 10% of the company and pushing ownership back below 10% lowers certain regulatory burdens.

I am quite willing to accept that this purchase is good for both parties. I just choke on the implication that this is somehow a return of capital to shareholders in general.

To the extent that this is an “opportunity” for Phillips 66, it should be because it is an opportunity to buy back shares at less than their estimated intrinsic value. It is nonsense to imply that returning capital to (departing) share owners is always a good thing for the remaining continuing owners.