I was interviewed on BNN TV (Business News Network – Canada) on February 26, 2018 at 8:40 a.m. ET on Warren Buffett’s Letter To Shareholders.
Highlights of my interview:
(1) Warren Buffett has not made a major purchase recently because stocks are near all-time highs and he would have to pay a 25% premium over current market prices to acquire a company. He will pay only a “sensible purchase price”. Berkshire has $116 billion in cash and Buffett will participate in only friendly deals. However, Berkshire has been a net buyer of common stocks over the past year.
(2) At current interest rates, Warren Buffett thinks stocks are more attractive than bonds. Buffett is optimistic and expects stocks to rally over the next 1 – 2 years. But if the market should decline, then he is prepared to pounce and acquire a whole company or more.
(3) Warren Buffett and Charlie Munger are in charge of allocating capital and they (primarily Buffett) will decide on major purchases. Buffett’s portfolio managers, Todd Combs and Ted Weschler, manage part of Berkshire’s common stock portfolio.
(4) In the near future, Berkshire could once again go partners with 3G Capital of Brazil in acquiring another food company such as their joint effort with H.J.Heinz (2013) and then Kraft (2015) (now Kraft Heinz). Berkshire has been the financing partner and 3G Capital the operating partner. Since Berkshire’s last large acquisition was Precision Castparts (aircraft parts manufacturer) which closed in January 2016, Buffett might acquire another manufacturing company, or an electric utility, or another business in the same industries as its current 60 businesses are in. He will look for a well run business, with good growth prospects, at a sensible purchase price.