These are some highlights from a 3-hour interview of Warren Buffett on CNBC from 6:00 a.m. – 9:00 a.m. eastern time on March 3, 2014. In addition, Todd Combs, Ted Weschler, and Tracy Britt Cool appeared together for 30 minutes.
(1) Warren Buffett (WB): 3G Capital and Berkshire would like to do another acquisition (similar to H.J. Heinz). “I think we will.”
(2) WB likes IBM’s share buyback, but would like to see revenues pick up. The CEO (Virginia Rometty) will be judged 5 years from now. Berkshire bought a few more shares this year.
(3) WB has donated 160,000 class A shares to the Gates Foundation with a current market value of $27 billion. According to Forbes Magazine, Warren Buffett is the 4th richest person in the world with a net worth of $58 billion. Bill Gates is first ($76 billion). (Note: If WB had not donated $27 billion, his net worth would be $85 billion and he would be the richest person in the world.)
(4) WB: Bitcoin is not a currency since it is not a means of exchange or a store of value. He would not be surprised if Bitcoin was not around in 10 – 20 years.
(5) WB: Todd Combs and Ted Weschler will be with Berkshire forever. They are the kind you would want your daughter to marry. They each are managing over $7 billion. (Note: Berkshire’s portfolio equals $115 billion.) They evaluate businesses. They are business analysts. They possess soundness and brilliance. They dream about things that have not yet happened. They also think about the downside. They have already made Berkshire billions. WB is not looking for a third portfolio manager.
Ted has also helped out by negotiating a deal with Media General and the Rescap bankruptcy. Todd negotiated with Phillips 66 (exchange of Phillips 66 stock and cash for a chemical operation — this was WB’s idea, but Todd successfully implemented it.) They are each earning less than they would if they were running hedge funds. Todd and Ted “smashed” Buffett’s performance. Todd, Ted, and Tracy possess intellect and character. WB reads 500 pages per day (annual reports, etc.) (as do Todd and Ted). Knowledge compounds. WB read Bank of America annual reports for 50 years. Ted does not meet or talk to management. He reads annual reports, transcripts, 10K’s and 10Q’s. When he identifies a good investment, he waits for the right price.
Todd and Ted have an 80-20 compensation arrangement (each earns 20% of their salary based on the performance of the other.) If they were to add another “partner”, Todd would choose Lou Simpson, Tom Bancroft, or Meryl Witmer (on Berkshire’s Board of Directors). Ted would choose David Tepper.
Ted has been following the dialysis industry for 30 years (Berkshire has a large stake in kidney dialysis company DaVita.) He would invest in a health care company if it offered the best quality of care, saves money for payers, has a high return on capital, has predictable growth, strong management, and will be more valuable in 5 years.
(6) WB: Coca-Cola has wonderful brands and its unit sales are increasing. Carbonated soft drinks comprise 1/4 of liquids sold in the U.S.
(7) WB: The U.S. economy (GDP) should grow at least by 2%/year and with a 1% growth in population, there will be an increase of 20% in per capita output in a generation.
(8) WB: Why sell stocks today because of Ukraine? The stock market rose throughout World War II. In time of war one should own assets such as houses, land, or securities. Money will be worth less.