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Whitney Tilson: Buffett Just Put a Hard Floor Under Berkshire

Warren Buffett made headlines on Monday with a surprise that stunned the Street.

The widely followed billionaire investor said Berkshire Hathaway may repurchase some of the company's Class A and/or Class B shares if they're cheap enough.

In a press release the company says, "The repurchase program is expected to continue indefinitely and the amount of purchases will depend entirely upon the levels of cash available, the attractiveness of investment and business opportunities either at hand or on the horizon, and the degree of discount from management’s estimate of intrinsic value."

In other words, it's an authorization, not a mandate. Berkshire isn't necessarily buying back shares now, and may never repurchase any at all. However, just the potential is enough to change the game, says esteemed investor Whitney Tilson of T2.

In a live interview he tells us the announcement probably puts a pretty hard floor under the stock. ”The risk reward has shifted significantly and favorably – there aren’t that many stocks out there that have this kind of floor. I see Berkshire as a stock with lots of upside and now little downside.”

And Tilson is putting his money where his mouth is. “Berkshire is our largest position and we added to it on Monday,” says Tilson.

On a related note there’s been a lot of speculation about whether Buffett’s move should be interpreted as bullish or bearish commentary on the market as a whole.

Skeptics such as trader Steve Grasso say if Berkshire can't figure out what to do with their money other than using it for a buyback, it speaks volumes about what Buffett thinks about the market broadly.

However Whitney Tilson doesn’t see it like that. He says Buffett’s move should be interpreted as a bullish call.

Not only does Tilson say it’s a referendum on how cheap Buffett thinks his own stock is – “but that he doesn’t think the market is going to collapse and therefore buying back stock is a good use for his cash.”

* Whitney Tilson is founder and managing partner of T2 and a CNBC Contributor. Celebrated for his investing prowess, Tilson generated substantial profits with a short position in housing ahead of the subprime crisis.

He is also the co-founder and co-chair of the 7th Annual New York Value Investing Congress which will be held October 17 and 18th in New York City.





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Trader disclosure: On Sep 26, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (BAC); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Terranova is long VRTS; Terranova is long OXY; Terranova is long HOS; Terranova is long OIH; Terranova is long CVI; Terranova is long AXP; Terranova is long EMC; Terranova is long WFM; Terranova is long AMZN; Terranova is long WFC; Terranova is long AAPL; Terranova is long IBM; Terranova is long Silver puts; Finerman and Finerman’s firm own AAPL short calls; Finerman owns (BAC) and Finerman’s firm own (BAC) leaps ; Finerman owns GOOG; Finerman’s firm owns IBM; Finerman’s firm owns JPM leaps; Finerman’s firm owns M; Finerman and Finerman’s firm own MSFT; Finerman and Finerman’s firm own ORCL; Finerman owns IWM; Finerman owns MDY; Finerman owns SPY

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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For Whitney Tilson
Tilson owns (BRK.B)

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