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By Jeremy Glaser and Drew Woodbury, CFA | 05-04-2013 04:00 PM

No Big Surprises in Omaha; Berkshire Shares Look Undervalued

Although this year's Berkshire Annual Meeting didn't break new ground, it underscored the attractiveness of Berkshire shares, say Morningstar's Drew Woodbury and Gregg Warren.

Jeremy Glaser: For Morningstar, I’m Jeremy Glaser. The 2013 Berkshire Hathaway Annual Meeting just wrapped up, and I am here with Gregg Warren and Drew Woodbury for their takeaways on the second half of the meeting. Gentlemen, thanks for joining me again.

Drew Woodbury: Thank you.

Gregg Warren: Thanks for having us.

Glaser: So I think one of the most interesting questions in the second half was about, if the 1.2 times book value for [repurchasing Berkshire shares] is really a hard floor for Warren Buffett if he were to always buy if the stock went below there. What do you think about his answer to that? Do you think there are some more repurchases in the future?

Warren: I think it's probably more of a gray line than anything else. I think he basically pointed out that they would only really be buying back shares if they had a significant amount of cash on the sidelines that they could dedicate to it and that the stock was actually trading at significant value or discount to its intrinsic value, which is a little bit different than this 1.2 times book. But intrinsic value is generally above the book value overall. But we've always sort of guessed that he would probably be more willing to buy back stock between 1.1 and 1.2, enough of a discount to that line that he's drawn on the sand.

Woodbury: Yeah. It's probably hard for him to go out exactly at 1.2 and do it without kind of moving the market.

Glaser: So another thing that came up a lot was talk about the economy, such as if deficits are holding back the economy or how housing is doing. What was your take on his thoughts of the U.S. economy and what it meant for his portfolio?

Woodbury: Yeah. So he claims not to be too great of an economic prognosticator over the long term. He kind of described what was going on now, that things are improving. He didn't think there's any possibility of a double-dip recession, even before, earlier when there was more of a concern. He still views housing as a very good asset for people, especially if they are going to be living in the same community for a long time and with the low interest rates available, that's an attractive asset class for him.

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