Thursday, August 30, 2018

Warren Buffett Interview: Bought More Apple, Berkshire Buys Back Stock

Warren Buffett of Berkshire Hathaway was just interviewed by Becky Quick on CNBC.  Here's a summary of his thoughts:

He notes he bought a little more Apple (AAPL) recently.  He doesn't care about one quarter or one year's worth of iPhones sold.  He'd obviously like to see each product cycle do well, but he notes he's mainly viewing the company as an indispensible utility.  He argues that the value you get on a daily basis for only $1000 (price of an iPhone) it's a no-brainer.  People are so attached to their devices and use them for so many different things.  He doesn't own an iPhone but has an iPad and uses it frequently.  Would love to see the stock pullback as he could buy more or the company could buyback more stock at cheaper levels.

Berkshire hasn't been buying more airline stocks mainly because he doesn't want to go over the 10% ownership threshold in them, and he has to trim them if the companies are buying back stock.

Buffett said that consumer packaged goods are a good business from a return on tangible assets perspective.  While he acknowledged the businesses have seen increased competition and changing consumer tastes, they're still a good place to be.  He likes brands but is aware it's a tougher environment than it used to be, especially with the stocks much higher these days.  When asked about Campbells (CPB), he said Berkshire wouldn't be interested but he couldn't really speak for Kraft Heinz (KHC).  He said it's very hard to offer a premium for a packaged goods company.

Berkshire bought a little bit of its stock recently, Buffett notes.  They removed the previous restriction of a multiple of book value.  They're now looking at it from an intrinsic business value perspective.

"The economy since the fall of 2009 has gotten progressively better, but it started from a very low base.  We've had 9 full years of improvement in business. Business is good, across the board."

Noted that stocks are better than bonds and real estate.

He's seeing inflation in input costs on raw materials.  It's hard to say if that's due to the tariff situation or other factors, but he noted it increased certainly over the last year and particularly after the trade war situation.  He specifically noted steel, building materials, as well as paint cans as areas where they're seeing increased costs.

On Fed chairman Jay Powell, Buffett likes him and thinks he's doing a good job and will do what's best for the economy.