Exxon

Exxon (now ExxonMobil) is one of the world's largest energy companies. In the 1984 Letter, Buffett cited it as a rare example of a "mega-cap" corporation practicing rational capital allocation through Share Repurchases.

📍 1984 Context

Buffett praised Exxon’s management for their massive share repurchase program.

"A particularly noteworthy example of rational behavior in a giant corporation is the share repurchase program of Exxon." — 1984 Letter

🧠 Why Buffett Liked It

Opportunity Cost: Exxon's management recognized that buying its own oil reserves in the stock market (via repurchasing their own shares at a discount) was far more profitable and less risky than high-cost "wildcat" exploration or diversifying into unrelated industries.
Transparancy: Buffett appreciated the management's clear explanation that they were choosing self-investment because it offered the highest and most certain return for shareholders.
Anti-Empire Building: It was the antithesis of The Institutional Imperative, where the instinct of most large company managers is to grow the asset base at any cost.

🔗 Connections

Concept: Share Repurchases
Concept: The Institutional Imperative (The counterpoint)
Source: 1984 Letter

📚 Historical Mentions & Citations (1)

Click a reference document below to expand and read the exact paragraph(s) containing this concept in the archive.

📜

1984 LetterExcerpt Available

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We have prospered in a very major way—as have other shareholders—by the large share repurchases of GEICO, Washington Post, and General Foods, our three largest holdings. (Exxon, in which we have our fourth largest holding, has also wisely and aggressively repurchased shares but, in this case, we have only recently established our position.) In each of these companies, shareholders have had their interests in outstanding businesses materially enhanced by repurchases made at bargain prices. We feel very comfortable owning interests in businesses such as these that offer excellent economics combined with shareholder-conscious managements. | No. of Shares | Company | Cost | Market | | :--- | :--- | :---: | :---: | | 690,975 | Affiliated Publications, Inc. | $ 3,516 | $ 32,908 | | 740,400 | American Broadcasting Companies, Inc. | 44,416 | 46,738 | | 3,895,710 | Exxon Corporation | 173,401 | 175,307 | | 4,047,191 | General Foods Corporation | 149,870 | 226,137 | | 6,850,000 | GEICO Corporation | 45,713 | 397,300 | | 2,379,200 | Handy & Harman | 27,318 | 38,662 | | 818,872 | Interpublic Group of Companies, Inc. | 2,570 | 28,149 | | 555,949 | Northwest Industries | 26,581 | 27,242 | | 2,553,488 | Time, Inc. | 89,327 | 109,162 | | 1,868,600 | The Washington Post Company | 10,628 | 149,955 | | | | $573,340 | $1,231,560 | | | All Other Common Stockholdings | 11,634 | 37,326 | | | Total Common Stocks | $584,974 | $1,268,886 |

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