Warren Buffett & Jorge Paulo Lemann Talk at Harvard Business School: Brazil Conference

Berkshire Hathaway's Warren Buffett and 3G Capital's Jorge Paulo Lemann sat down for a talk at Harvard Business School for the Brazil Conference 2017.  Here are some takeaways:

- Buffett considers it one of the larger mistakes in his life that he didn't team up with Lemann until later in his life

- Buffett: "Who you have as partners in life... it's a lot more fun and a lot more profitable to have good partners."

- Lemann met Buffett at the Gillette board and Buffett said he was very rich in the sense that he had tons of time and was able to do what he loves and that's what Lemann wanted after selling the bank.  Buffett: "The two things you can't buy are time and love."

- Buffett tells students to look for the job they'd still do if they didn't need to have a job.  Says to always hang out with people that are better than you.  You don't need a high IQ to succeed in life... find the place where your talents leave you happiest and produce the best results.

-  Lemann almost got expelled his first year at Harvard, went broke his first attempt at business, and he finally started getting going at age 30.

-  Buffett says Tom Murphy is his #1 example as a leader. Also cited Amazon's Jeff Bezos and then Jack Welch too.  Good leaders have big ideas.  "They don't settle cheap."

- Lemann on leadership: have focus, be efficient, have good people, keep costs down, take a bit of risk

-  3G likes to evaluate people in the system by giving them an opportunity to learn from mistakes; wants people that will try hard and do things exceptionally well.  "The only thing you cannot accept is somebody who is ethically not totally there."

-  Buffett asks himself: do they love the money or do they love the business?  (When he looks at leaders for his decentralized model at Berkshire)

-  "That's the one thing I've probably improved on over the years: judging the future behavior of people I encounter." - Buffett

-  "The first thing I want is a business I understand... where it'll be 10, 15, 20 years from now.  Understand if there's some economic castle with a moat, and whether the knight in the castle is any good." - Buffett

-  "The ideal moat is something that would be protected by any competition; usually earnings are regulated in businesses like that.  Perfect product is something that costs a penny and sells for a dollar and is habit forming." - Buffett

-  Lemann says they're "Running things for the long run and building them to last forever."

-  "In the food area, there's a lot to be done still... it'll probably be bigger than the beer area possibly ... We have to adjust, we have to be more nimble (to consumer taste)." - Lemann

-  "On SAB: the big attraction there is Africa... hot climate, young population, we have to learn how to operate, but the potential is there.  Africa maybe 30 years from now will be bigger than the US in beer consumption." - Lemann

-  On the current largest market cap companies being tech.  Lemann: "The better investments will be in technology.  But the problem is technology is very difficult to pick and things change very fast there."


Embedded below is the video of Jorge Paulo Lemann and Warren Buffett at the Brazil Conference 2017:



For more wisdom, we've also highlighted Warren Buffett's 2016 letter as well as Buffett's talk with Bill Gates.

Daniel Dreyfus Long Reliance Steel & Aluminum: Sohn Canada Presentation

We're posting up notes from the Sohn Canada Investment Conference 2015 (Capitalize For Kids.)  Next up is Daniel Dreyfus from 3G Capital who pitched a long of Reliance Steel & Aluminum (RS).

Daniel Dreyfus' Capitalize For Kids Presentation

-    Finds opportunities where profit margins are low and average valuation is applied
-    Wants something levered to US economy to shield global worries
-    Long Reliance Steel & Aluminum  (RS)
-    FCF yield 9.2% 2014
-    $6Bn EV, $53 stock price
-    Distribution business, levered to US
-    Largest buyer of steel, cut it to fit for client and deliver
-    Basically activity increases and falls with US economy
-    Size is their moat
-    Volume game, low margins
-    1 quarter since 1994 IPO with lost money so it’s a cash machine
-    Serves non-residential construction
-    Sees oil recovery as a free option in stock as it will see huge upside if the oil producers start building again


Be sure to check out the rest of the presentations from the Capitalize For Kids Conference.

Warren Buffett's Berkshire Hathaway & 3G Capital Buy Heinz

Warren Buffett's Berkshire Hathaway and 3G Capital Management are paying $72.50 a share to buy Heinz (HNZ).  The deal is around a 19% premium to the stocks' all-time high.  Here's the breakdown of the deal:

- Berkshire puts $4.4 billion in equity
- 3G puts $4.4 billion in equity
- Berkshire buys $8 billion of preferred stock
- JPMorgan Chase & Wells Fargo with debt financing

Berkshire Won't Have Operating Role

3G will own half of the equity and will operate the company (Berkshire won't have an operating role).  While the headlines will focus on Berkshire 'buying' Heinz, there should be an asterisk by that because 3G will run the company. 

When Buffett typically buys a company, you have to think along the lines of Burlington Northern Santa Fe Railroad where he buys it all and it gets integrated into Berkshire.  This isn't one of those deals.

The takeaway here is that Buffett is just putting cash to work at very good terms for him.  After all, the preferred shares will yield 9%.  And even after this deal, he still has plenty of cash to do another deal in the future.

Buffett was approached about the deal in December.  Of it, Buffett said, "This is my kind of deal and my kind of partner.  Heinz is our kind of company with fantastic brands.  I have a file on Heinz that goes back to 1980."  That just goes to show how Buffett is always researching and keeping tabs on companies he's potentially interested in.

For more on this investor, head to Charlie Munger and Warren Buffett's secrets to investing success.