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Warren Buffett Sees a Stock Market Bargain

Jemal Countess/Getty Images for Time Inc.(NEW YORK) -- Warren Buffett’s Berkshire Hathaway, which has one of the highest share prices in the world, announced Monday its first buyback plan in at least four decades.

Companies buy back their own shares when they believe they are especially cheap, and Berkshire Hathaway is going for fire-sale prices these days. The shares closed Friday at $100,320 each, down 17 percent this year. They jumped $5,700 Monday on the news of the buyback, even though the Omaha, Neb.-based company didn’t say how many shares it would repurchase.

In a statement, the company said: “The underlying businesses of Berkshire are worth considerably more than this amount. If we are correct in our opinion, repurchases will enhance the per-share intrinsic value of Berkshire shares.”

Berkshire owns diverse businesses including insurance, retail, railroads, furnishings, newspapers and electric and gas utilities.  The firm has a pile of cash: $47.9 billion as of June 30.

But shareholders don’t get to see any of that cash. Over the years, Berkshire hasn’t paid a dividend; instead it plows the money back into the company and uses the earnings from it to boost profits.

Copyright 2011 ABC News Radio

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