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Buffett's Berkshire Buys $1.2 Billion Of Its Own Shares

Warren Buffett
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Warren Buffett

Warren Buffett's Berkshire Hathaway has bought 9,200 of its Class A shares at a price of $131,000 each, a level just above yesterday's closing price of $130,831. The stock is up less than three percent in early trading today.

Total price of the Berkshire buy: $1.2 billion.

A news release says the shares were purchased "from the estate of a long-time shareholder" but doesn't identify that person. CNBC's David Faber speculated the sale may have been motivated by the seller's desire to avoid higher capital gain taxes next year, amid Washington's ongoing fight over the "fiscal cliff."The release also says Berkshire has raised its price limit for repurchases to 120 percent of book value.

In September of 2011, the Berkshire board authorized buybacks at up to 110 percent of book. As of September 30 of this year, Berkshire reported a book value of $111,718 per Class A share, up 11.9 percent year-to-date.

Increasing the limit at the same time as this purchase, presumably to allow it to take place close to its current market value, implies a current book value of less than $119,000, but more than $109,000. That makes today's repurchase less of an endorsement of the current stock price than it would have been had the limit remained at 110 percent.

(Read more: Buffett Joins Call for 'Strong' Estate Tax)

At the Berkshire shareholders meeting in May, Buffett said he was "very comfortable" with buybacks at less than 110 percent of book value, but could be OK with a "somewhat higher" level,

He added that he doesn't try to get people to buy Berkshire stock when he thinks it is overvalued. When the company does buy back shares, he believes it's only fair to let the sellers know he thinks the price is too cheap.

Over the years, Buffett has been critical of companies that buy back shares when the price is too high. He says a CEO's outsized ego is often responsible for that mistake.