Warren Buffett, Charlie Munger & Bill Gates Interview

Berkshire Hathaway's annual meeting was this past weekend and was filled with wit and wisdom from investing legends.  In a separate interview, CNBC's Becky Quick sat down and talked with Warren Buffett, Charlie Munger, and Bill Gates.

Here's some takeaways followed by the full 2-hour video below.  The first hour was just Buffett by himself and then Munger joined in, and finally Gates joins at around 1hr 20.


Buffett, Munger & Gates Interview 2019

- Buffett says continued trade war would be bad for the whole world

- On Kraft Heinz (KHC): "The company has my confidence."  If he just owned Heinz, he says he'd be doing better but they paid too much for Kraft.  On overpaying: "Time usually works it out, but capital could have been better deployed."

- On the Occidental Petroleum (OXY) deal he's backing:  They've committed the $10 billion 100% and they don't have control over what OXY does with the money or the terms of the deal, etc.  While the 8% preferred is a sweet deal for him, he noted that, "It's a bet on oil prices over the long-term more than anything else.  It's also a bet on the fact that the Permian Basin is what it's cracked up to be."  He and Munger feel good about doing the financing of the deal and they could have done $20bn instead of the $10bn if needed.

-  He likes when Apple (AAPL) goes down, "Because they're repurchasing shares and when they repurchase shares our interest goes up and we don't lay out a dime; I love it."  He's "wildly" in favor of the company's $75 billion buyback.

- "I will always react well to declining prices."

- He thinks China and the US will be the two big superpowers over the next 100 years and that the two won't always get along and there will be disagreements over various things.

- On Wells Fargo (WFC):  Munger said: "I think it's a fine company; so they made one bad decision about an incentive plan.  I regard it as an honest mistake not as some deep moral failure ... they just had a blind spot."

-  Buffett said: "Charlie beats this into me all the time:  As soon as you find a mistake, do something about it.  And sometimes that's unpleasant.  But I've gotta do it."

-  Bill Gates on China/US: "It's the most important relationship in the world."

-  Gates is also concerned about intellectual cooperation being slowed down between the two countries and things like artificial intelligence

- "Anger drives out reason." ~ Munger

"  I think people should have modest expectations" about stock returns going forward, Gates says.  He thinks valuations have gotten high and he's amazed at that, but he hasn't made many changes to his Foundation's equity portfolio.

-  "I think stocks are ridiculously cheap... if you believe that 30 year bonds at 3% makes sense." ~ Buffett

- Buffett on what he's been reading lately:  Melinda Gates' book The Moment of Lift


Video of Interview

Embedded below is the 2-hour interview with Warren Buffett, Charlie Munger, and Bill Gates:

Warren Buffett Interview: Summary, Video & Transcript

Yesterday on CNBC Warren Buffett sat down for a 2-hour interview with Becky Quick and shared his thoughts on a number of financial topics.  Here's a summary and select quotes, with videos and transcript below.


Warren Buffett Interview Summary

- On the economic signals he sees from all his businesses:  "The rate of improvement has tapered but certainly hasn't flattened ... Home construction has been disappointing, but our retail figures in January were not strong, but January is a peculiar month.  Right now things look fine."  He also noted he sees some signs of inflation in raw material costs.

- On the Federal Reserve & interest rates: "I don't second guess (Jay Powell) at all.  He's a terrific choice."  He said what the Fed does doesn't affect what Berkshire does.

- He's amazed that ten years after the crisis that rates are where they are worldwide (especially negative rates) with the world doing 'really well' now.  "The real question for investors: are these rates the new normal?"

-  On Apple (AAPL): "The lower it goes, the better I like it obviously ...  If it were cheaper, we'd be buying it.  We aren't buying it here"  This quote is interesting considering that AAPL was recently down as much as 30+% in the fourth quarter, but Berkshire was a net seller of shares as one of the portfolio managers (not Buffett) was selling.  His average cost basis is around $141 per share.

- Likes financials as "very good investments at sensible prices.  They're cheaper than other businesses that are also good businesses by some margin."  Says Moynihan at Bank of America (BAC) was underestimated and has done excellent.  Says JPMorgan Chase (JPM) is a very well managed bank.

-  Wanted to be buying stocks in Q4 as they were cheaper, but it sounds like Berkshire was keeping cash on hand for a potential acquisition that didn't materialize.  He said they haven't been buying equities yet in 2019 as the market as 'basically gone straight up.'

- Notes that portfolio managers Ted Weschler and Todd Combs since joining Berkshire: "Overall, they are a tiny bit behind the S&P, each, by almost the same margin."  The now manage around $13 billion each.  Buffett says they've also done better than he has over that time period.

-  On the trade war: The tariffs have had some impact on some of his businesses.  "It pushes prices up, there's no question about that."  It hasn't had a big impact at 10% but 25% you'll have to make changes (pricing, sourcing, etc).

- On KraftHeinz (KHC): Brands in general aren't what they used to be, and in many cases consumer packaged goods companies are being threatened by a ton of new brands, increasingly strong private label, and more.  "The ability to price has been changed, and that's huge."  On his investments he noted: "We didn't overpay for Heinz ... but we overpaid for Kraft."  Says the co still has real debt to be reduced.

- Sold Oracle (ORCL) quickly after concluding he didn't understand the business well enough.  His past dalliance with IBM also entered his mind.  "I don't think I understand exactly where the cloud is going."

- "You do not want to have a political view in investing."

- If Bloomberg announced he were running for President, he would be for him.  If Howard Schulz runs as an independent, he thinks he'd take votes away from Democrats, so it'd be a mistake for him to run.  Generally, third party candidates are going to hurt one side.


Warren Buffett Interview Video

Embedded below is the video of the full interview




Warren Buffett Interview Full Transcript

You can also read a full transcript here.

For more from Berkshire, be sure to also read Warren Buffett's annual letter 2018.

Warren Buffett's 2018 Annual Letter: Berkshire Hathaway

Warren Buffett has released his 2018 annual letter in Berkshire Hathaway's annual report.  In it, he notes they bought $43 billion of marketable equities last year and sold $19 billion.  Berkshire now has a cash-equivalents hoard of $112 billion and another $20 billion in fixed income.

Here's some select quotes from the letter with the full text below:

On share buybacks:  "All of our major holdings enjoy excellent economics, and most use a portion of their retained earnings to repurchase their shares. We very much like that: If Charlie and I think an investee’s stock is underpriced, we rejoice when management employs some of its earnings to increase Berkshire’s ownership percentage."

On Berkshire buying back its own shares:  "it is likely that – over time – Berkshire will be a significant repurchaser of its shares, transactions that will take place at prices above book value but below our estimate of intrinsic value. The math of such purchases is simple: Each transaction makes per-share intrinsic value go up, while per-share book value goes down. That combination causes the book-value scorecard to become increasingly out of touch with economic reality."

On holding cash:  "Berkshire will forever remain a financial fortress. In managing, I will make expensive mistakes of commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash."

On finding private acquisitions: "Prices are sky-high for businesses possessing decent long-term prospects.That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities.  My expectation of more stock purchases is not a market call. Charlie and I have no idea as to how stocks will behave next week or next year."


Embedded below is Warren Buffett's annual letter:



You can download a .pdf copy here.

For more from the Oracle of Omaha, be sure to check out Warren Buffett's recommended reading list.


We've also posted up other recent investor letters:

- Excerpts from Baupost Group's letter

- Third Point's Q4 letter 

- Sequoia Fund's letter

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.

Warren Buffett, Charlie Munger & Bill Gates Interview

Today on CNBC, Berkshire Hathaway's Warren Buffett was interviewed by Becky Quick and talked about a range of topics.  Charlie Munger and Bill Gates later joined the conversation.  Here's some takeaways and quotes:


Warren Buffett's Thoughts

On the market: Stocks aren't in a bubble now.  Though said some private deal valuations are getting high and it's harder to find bargains these days.

On the economy:  Thinks the economy has picked up steam. "Yeah, I see a lot of numbers (from all BRK's businesses).  Business is generally pretty strong."  He cited railcar loadings, etc.  Also notes you've seen some inflation.

Says he thinks it's hard for unemployment to really go much lower as they have a ton of jobs available.  "If a resource is scarce, prices go up."  Says certain job lines are much harder to fill these days (construction cited specifically).

On potential trade wars:   "I don't think we will have trade wars of significance."  He thinks there will be trade movements though.  Says a trade war with China would be negative for all involved as they have a common interest.

On Amazon / Jeff Bezos:  Still laments not buying it in the past, says what Bezos has done is incredible.

On moats: Cited iPhones, Costco, and Elmer's glue as examples

On Apple: Says he doesn't have to do anything because the company will buyback so many shares, so his ownership stake will go up naturally.  He recently bought a ton more AAPL shares.  Said he currently owns around 5% of the company but he'd like to own 100% of it.  The consumer behavior was the main driver behind his ownership, as the device has woven itself into consumer's daily lives and minds, and it's a very useful product.

On owning banks:  Has owned one in the past and loves the banking business but doesn't want to now because of the bank holding co act.  Says Wells Fargo (WFC) was slow to act in addressing bad actions but still has a fundamentally solid business.

On bitcoin:  Compared it to the tulip bubble years ago.  Says it's a non-productive asset and just sits there.

On autonomous vehicles: 'Net it will be bad for the car insurance industry if autonomous vehicles become the norm.'  It will be very hard to pick winners in 5 years.

On reading he recommends, Buffett again pointed to Chapter 8 of The Intelligent Investor.  But this time around he also recommended Chapter 4 of Steven Pinker's new book, Enlightenment Now.

Ends his interview by reiterating: "It's very important in life to associate yourself with people that are better than you."


Charlie Munger's Thoughts

On the biggest thing he and Buffett have disagreed on:  Munger wanted to buy the French stake in Costco.  Buffett didn't and says he should have.  "Charlie really wants to wait for the fat pitch."

Munger said, "There's a million ways to be irrational." And while Berkshire makes mistakes, they make them far less frequently than others and he thinks that's their main advantage.

Munger noted: "The Munger family is invested in China substantially.  Since about 14 years ago, and I did it because I respected the man that was going to do the investing (Li Lu) and it looked undervalued and the companies looked very strong."  Today, he says the best companies in China are still cheaper than the best companies in the US.  "I don't think it'd be all that hard for people to find 4 or 5 companies in China to invest in."

He also said he wished Berkshire owned more of Apple.  He likes that it's reasonably priced and strong, a 'very desireable combination' as well as 'very intelligent management.'

On bitcoin, Munger called it worthless artificial gold.  "It's a scumball activity."

On potential trade wars with China: "It would be insane for them not to work together."

On what he's been reading recently:  A book by a Chinese economist, though he didn't mention the name specifically.


Bill Gates' Thoughts

He said that "T-bills set the rules" and he pointed out that since the 10-year yields 3%, you've got that hurdle to get over by taking more risk.  He says asset class returns will be lower over the next 10 years.

On bitcoin: There's some really good technology as far as sharing databases etc, but the coin itself is a speculative thing.  He received some for his birthday a while back but sold it, so doesn't own it now.  Called it a greater fool investment, and said he'd short it if there was an easy way to do so.

Gates says there are tech stocks that are undervalued, but you're going to get very high variance as the winner in some markets gets a high share of the profit pool.

He owns a ton of Microsoft (MSFT) obviously, but revealed he has a 'fantasy stock portfolio' of companies he thinks will do well but doesn't own.  "The top tech companies have a very strong share of the profit pool right now."  He obviously declined to reveal names.

Gates also echoed Munger's China sentiment that it looked attractive.

On tech and data privacy, thinks regulation is inevitable.  But the big companies will handle that.

On Tesla (TSLA): thinks they have a great product but a very high valuation and a lot of competition coming.  Says autonomous and electric vehicles are coming simultaneously and thinks 15 years from now things will be very different.

On what he's been reading recently:  Hans Rosling's book Factfulness.  Says it helps you think about a lot of different things in the world.

Berkshire Hathaway Files Amended 13D on USG

Warren Buffett's conglomerate Berkshire Hathaway has filed an amended 13D with the SEC regarding its position in USG Corporation (USG).  Per the filing, Berkshire owns 30.8% of the company with 43.38 million shares as of March 23rd.

This is up slightly from the 39 million shares Berkshire reported owning at the end of 2017 per their most recent 13F filing.

The main reason for the filing is the information below, pulled verbatim from the filing:

"From time to time, beginning many years ago, executives of Gebr. Knauf Verwaltungsgesellschaft KG (“Gebr. Knauf”) and/or C & G Verwaltungs GmbH (“C & G Verwaltungs” and, together with Gebr. Knauf, the “Knauf Entities”) have contacted Berkshire’s Chief Executive Officer (“CEO”) to describe the Knauf Entities’ potential and conditional interest in a transaction with USG. Most recently, the Knauf Entities furnished Berkshire a copy of a letter from Gebr. Knauf to USG dated March 15, 2018 in which Gebr. Knauf submitted an indicative and non-binding proposal for the acquisition of 100% of the outstanding shares of Common Stock of USG at $42.00 per share.

On March 23, 2018 Berkshire’s CEO and another Berkshire executive held a telephonic discussion with two executives of the Knauf Entities and three representatives of one of the advisors of the Knauf Entities, during which Berkshire proposed to grant to the Knauf Entities an option to purchase all of the Berkshire Entities’ shares of Common Stock of USG, subject to legal review. Such option would be exercisable only in connection with the consummation of a purchase by the Knauf Entities of all of the outstanding shares of Common Stock of USG that the Knauf Entities did not already own, at a price of not less than $42.00 per share, subject to and in accordance with applicable law and contractual restrictions. The option exercise price per share was proposed by Berkshire to be the price per share paid to such other holders of Common Stock of USG by the Knauf Entities, less the option purchase price of $2.00 per share to be paid to the Berkshire Entities upon entering into a definitive option agreement. The option would have a term of approximately 6 months.

The Knauf Entities have not responded to this proposal, and the Reporting Persons do not know whether the Knauf Entities will pursue further discussion with Berkshire of the proposed option or will make an offer to purchase shares of Common Stock of USG. Berkshire has not agreed to support any plan or proposal by the Knauf Entities with respect to the Common Stock of USG, and there are no agreements, written or otherwise, between the Reporting Persons and the Knauf Entities.Depending upon price, market conditions, availability of funds, evaluation of other investment opportunities, and other factors, the Reporting Persons may at any time and from time to time sell or otherwise dispose of some or all of the shares of Common Stock of USG held by them, either as contemplated by the Registration Rights Agreement or in another manner permitted by applicable law."

Warren Buffett CNBC Interview: Summary & Transcript

CNBC's Becky Quick interviewed Berkshire Hathaway's Warren Buffett on a range of topics yesterday.  Below is a summary of noteworthy comments and a link to the full transcript.


On tax reform:  "It's a huge tailwind. And it's particularly a tailwind if you've got-- particularly for companies that have had lots of depreciation and taken bonus depreciation up front. So it's a big item-- there. Not as many companies have lots of appreciation and marketable securities, but it's a big item for those that do."


On market valuation:  "I mean, it--in fact, I-- the market-- the stock market relative to the long-term bond market-- people have free choices, pretty much, if they're going to be in marketable securities. They can own reasonably long-term bonds, they can own equities, or they can keep it in short-term cash equivalents. And--- if-you had to choose between buying long-term bonds or equities-- I would choose equities in a minute now ...

That doesn't mean I think the stock market is gonna go up or anything else. But if- I were going to own a 30-year government bond or own equity for 30 years, I think equities will considerably outperform that 30-year bond over the 30 years. I don't know what they're gonna do in any day or week or month ...

In-- so far this year we've been-- a net buyer, although we sold-- a chunk of Phillips to get below 10%"


On whether he would buy any parts of General Electric (GE):  "If we like the business and the price was right, we could write a check for cash. And that would apply to GE. They've got a few big businesses. I don't think they want to sell them, but they have some smaller units that they're interested in selling. But we're always in the market for a big business that we can understand and that we like, and we think that we've got the management for and so on."


On Buffett's favorite stock, besides Berkshire:  "Well, if you look at our holdings, you would assume that we like them in the order in which they rank by dollar value of holdings. But if you look at them in terms of recent purchases, you know, over the last year, we've bought more Apple than anything else ... I haven't told you what I might have been buying in the last week. Or month"


Shoutout to CNBC for asking the question we submitted on Twitter via the #AskWarren hashtag:  Has Buffett ever disagreed with any of Todd (Combs) or Ted's (Weschler) investments, and why?



"Yeah, well, they make their own decisions, 100% and they each manage $12 billion or $13 billion now. Well, they started actually, I think when Todd came about a year ahead of Ted. And I think maybe it was $2 billion, but it has increased at various points and then they've earned a lot of money for Berkshire, which builds up for them, too. There's certainly – they've done things I wouldn't have done. But I've done things they wouldn't do, too. I mean, I want them to figure out their own. The choices – they are good at managing money, and they've got the advantage of managing smaller sums than I'm running. But they've got the disadvantage of running quite a bit larger sums than most people run. I mean, it gets more difficult with size. But they not only have done a good job of managing the money and trusted them. But they've contributed to Berkshire in just dozens of ways. They were sensational hires."

Becky Quick then followed up and asked if he talks to Todd/Ted about investments beforehand:

"No, not ahead a time. And there's a number of them I haven't talked with them at all. I couldn't even – I couldn't name three quarters of their portfolio. I couldn't tell you the amounts. I don't remember that well. But I've gotten ideas from them. But they take on other tasks. I mean, Todd is on the health care situation. He's there on Saturday. I was there on Saturday. He's there all day talking to people around the country in terms of looking for the right CEO and that sort of thing. They are enormous contributors to Berkshire."


On owning Samsung in the past:  "I don't own them, and Berkshire doesn't own them now. But Berkshire has owned Samsung. It doesn't get reported in our 13F.  But I think I'm right on that. I'm 99% sure. And so we bought some when Samsung was at about a million yuan – you got to divide that by something over 1,000 – we bought a reasonable amount. We did sell it when it went up. It's higher than this now. It went up to 1.8 million, or something. I think it's around 2 million, 2.3 million or 2.4 million. The yuan went in our favor a little bit too. So we did a little bit better in dollars."


On why he sold IBM in favor of buying more Apple (AAPL):  "Well I was wrong on – at least I felt I was wrong on IBM. Now, I may have been wrong when I sold it, too. But I certainly was wrong when I bought it. And I've felt that Apple has an extraordinary consumer franchise. Apple's a different kind of business than IBM. They're both tech, obviously, in a major way. And they even have a joint venture, you know, on some things. But I think I understand consumer behavior perhaps better than I do the tech business. It wouldn't take much to beat it. And I liked it, I like Tim Cook very much. I like their policies. I see how strong that ecosystem is. It's to an extraordinary degree. I mean, I look at my grandchildren, my great grandchildren and everybody in the office, I mean, their families. I talk to the people at the Furniture Mart when the ten hadn't arrived, nobody goes over to, you know, buy an Android. I mean, you are very, very, very locked in at least psychologically and mentally, to the product you're using. I mean, you got all kinds of stuff up on there. It's a very sticky product."


On the airline industry (he owns stakes in AAL, UAL, DAL, LUV): "It's-- a business that's-- always subject to somebody doing something very dumb competitively. And—-- they've done it a lot in the past. There was more chance of them doing it when there were seven of 'em than the big ones, than-- than four. I mean, the industry was suicidally competitive for decades. I mean, they net lost money-- and-- while they were growing like crazy in units. And I was on the board of U.S. Air so I saw how it all happened. And it can turn into fierce competitive battles that'll wipe out earnings. Or it can be a business that's more decent, but still subject to lots of competition. And-- it's really hard to know, you know, for sure how it will develop. It's-- not risk free in their competition at all. In-- in the railroad business, all the tracks have been pretty much laid and all of that. So that settled into a business. Now, it's regulated and means that your earnings, you know, can only-- you're a common carrier. And-- many places, you compete with another railroad, and other places, you don't. And there're different rules that apply even in terms of pricing in those cases. But it's a perfectly decent business. It will lose volume in coal over time. And that's an important product. But it'll probably gain in other areas. So it's-- it's two different animals."


On stocks and volatility:  "Well, some people should not own stocks at all because they just get too upset with price fluctuations. If you're going to do dumb things because a stock goes down, you shouldn't own a stock at all ... But some people are not actually emotionally or psychologically fit to own stocks. But I think more of them would be if you get educated on what you're really buying, which is part of a business. And the longer you hold stocks, the less risky they become, whereas the longer the maturity of a bond, the more risky it becomes."

Here's a link to the full CNBC Warren Buffett interview transcript.

And for even more, be also sure to check out Warren Buffett's 2017 annual letter.

Warren Buffett Annual Letter 2017

Warren Buffett is out with his 2017 annual letter to Berkshire Hathaway shareholders.  In it, he details the full results of his hedge fund bet pitting fund of funds versus an index fund which is worth reading in full.  TLDR: They performed well the first year, but then not so much after that. Not to mention layers of fees.

In the mean time, here are some select quotes with the full document below.

"Despite our recent drought of acquisitions, Charlie and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own."

"There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.

"Investing is an activity in which consumption today is foregone in an attempt to allow greater consumptionat a later date. “Risk” is the possibility that this objective won’t be attained."

"I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier – far riskier – than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates."


Embedded below is Warren Buffett's 2017 annual letter:



You can download a .pdf copy here.

For more from the Oracle of Omaha, be sure to also check out Warren Buffett's interview with CNBC this week.

Warren Buffett Full Interview: On Succession, Stock Market, Bitcoin & More

Berkshire Hathaway's Warren Buffett was just interviewed by CNBC and here's a summary as well as the full video of the interview.

On succession:  He says Berkshire will eventually be in a period of transition and Ajit Jain and Greg Abel have been named vice chairmen.  While Buffett isn't ready to hang up his hat yet, eventually he will.  He says he's in good health and if that changes he'd let shareholders know.

On stocks right now: "They're not richly valued relative to interest rates."  He says that the tax act is also a huge factor in valuation.  He didn't think that a 21% corporate tax rate was baked into the markets and he highlighted how such a huge change (from the previous 35% rate) is a huge change.  On if he's buying stocks now:  "Net, we're buying ... we're basically buyers over time."  He has a unique position as the cash keeps rolling in for him to invest.

On the economy:  The tax cut will be interesting to see how it affects things as the mix is changing.  He said they've never tried to make money by predicting economic changes.  They've never bought a company or a stock based on macroeconomics.

On interest rates:  The low rates have buoyed the stock market significantly.  It's a strange situation to have the Fed say their goal is 2% inflation and then people buy Treasuries at 1.5% so the government has basically said it doesn't pay to save.

On bitcoin/cryptocurrency:  "In terms of cryptocurrencies generally I can say almost with certainty that they will come to a bad ending.  When it happens or how or anything else I don't know.  If I could buy long-term puts, a 5 year put on everyone one of the cryptocurrencies I'd be glad to do it."  Though it sounds like he wouldn't be outright short given the volatility and potential for uncapped losses (hence using puts would outline exact capital at risk).

On Apple (AAPL):  "The market is not yet saturated for iPhones."  When Buffett himself finally buys an iPhone he joked it will finally be the end of the run.

On Berkshire's cash level:  A little over $100 billion, almost all in Treasury bills.  He normally likes to hold $20 billion so he's got a lot of excess.  He said he wants to put it to work but obviously he hasn't yet.

"If you're buying something because it went up yesterday or last week, that's not a good reason for buying anything."


Charlie Munger then joined the conversation towards the end.  He called both bitcoin and venture capital bubbles.  On the latter, he said there's simply too much capital chasing too many deals.  On the tax cuts, he thinks there's a chance they may work quite well.  He also notes that stocks aren't as cheap as they were (20x vs 15x) but they're probably better than bonds.



Embedded below is the video of Warren Buffett's full hour-long interview with CNBC as well as Munger at the end:

.

For more from the Oracle of Omaha, be sure to also check out a rare 1985 interview with Warren Buffett.   And for more from Munger, check out last year's Q&A session he did.

Warren Buffett, John Templeton & Robert Wilson Interview From 1985

A reader was kind enough to pass along an old interview from around 1985 with Adam Smith featuring Warren Buffett, John Templeton, and Robert Wilson where each investor talked about their investment process and style.


Warren Buffett Interview

Buffett starts the interview with his trademark quote: "The first rule in investment is don't lose.  And the second rule in investment is don't forget the first rule, and that's all the rules there are."

Buffett said the most important quality of an investor is the temperamental nature rather than the intellectual capacity.

He also pointed out the short-term nature of others: "Most of the investors focus on what the stock is going to do in the next year ... They do not really think of themselves as owning a piece of the business."

Buffett said he prefers to value the business first without even knowing the price.  That way he can make a determination and then decide how it compares to the current valuation.

He said to define your area of competence, then within that area of competence find whatever sells at the cheapest price relative to value.

It's funny to hear Buffett say that he doesn't own IBM (IBM) in the interview as he noted he doesn't dabble in tech stocks.  Fast forward 30+ years and his views have evolved a bit.  He now owns both IBM and Apple (AAPL) today, though he's been selling the former as we noted in our recent newsletter.

"Boredom is the problem with most professional money managers."  He's perfectly content to sit and wait for the fat pitch.

Buffett was featured in Adam Smith's book Supermoney.


John Templeton Interview

Templeton made his mark by going against the herd, and thought his distance from Wall Street was an advantage (he was in the Bahamas).  Buffett, of course, has also been positioned away from New York in Omaha, Nebraska.

Templeton developed a motto: "To buy when others are despondently selling and to sell when others are avidly buying, requires the greatest fortitude and pays the greatest reward."

He said his average holding period was 6 years so patience was the name of his game.  His strategy was to look for bargains worldwide and to buy the cheapest stocks and then to extrapolate earnings further into the future than most investors.


Robert Wilson Interview

He was focused on stocks with rapidly growing earnings and bets against those whose earnings are going down.

He said, "I am not an original thinker.  I tend to rely on other people to feed me ideas.  And more bright people are in New York than anywhere else. I'm a derivative thinker."

His philosophy is to be in stocks that have potential for huge gains and risk/volatility is perfectly fine by him.  "The only way one makes money in the market is when the market's perception of a stock changes."

He was looking for stocks where earnings haven't started to improve yet, or if they're improved they're going to accelerate.

Wilson also focused on the notion of hubris in markets and how he too fell victim to it.

Embedded below is the video of the interview with these well known investors:

Warren Buffett Acquires Pilot Flying J

Warren Buffett's Berkshire Hathaway has made another big buy.  It's just been announced that Berkshire Hathaway will be acquiring Pilot Flying J, the US's largest truck stop operator.  The chain owns 750 truck stops.

Berkshire has actually acquired a 38.6% minority stake that will eventually see them become the majority shareholder in 2023 when they acquire an additional 41.4% equity stake.  The Haslam family will retain a 20% ownership stake.  The company sees around $20 billion in revenue and has over 26,000 employees.

In a statement, Buffett said that, "The company has a smart growth strategy in place and we look forward to a partnership that supports the trucking industry for years to come."

For more from this investor, we posted a recent Warren Buffett's interview on a myriad of topics.

Warren Buffett Interview on CNBC

Berkshire Hathaway's Warren Buffett appeared on CNBC today for an interview.  In it, he talked about the economy, hurricane Harvey's effect on insurers, and more.

On Hurricane Harvey: While he says there will be a lot of insured loss from the hurricane, he notes there will also be a lot of uninsured loss.  "The problem with flood insurance is the only people that buy it are the people that are gonna need it."

On North Korea, Buffett said "I've been concerned since 1945, this is the ultimate problem."

Buffett was asked if the economy feels like a 3% GDP economy and he said no.  He said it's been about 2% a year since 2009 and he guesses that's where we are now.

During the interview, Buffett also mentioned that he has not sold a share of Apple (AAPL), one of his most recent large investments.

He said he was more certain of AAPL's future than he was of IBM (IBM), which he also owns.  Buffett has been selling down his IBM stake, which we highlighted in the new issue of our newsletter.

Buffett also said that he wasn't concerned about Wells Fargo (WFC) as a long-term investment and called it a 'terrific' bank that did some things wrong that were being corrected.  This, of course, comes after the bank has faced numerous scandals involving customer accounts.

Regarding his large stake in Kraft Heinz (KHC), Buffett shot down the notion that the company would buy Mondelez (MDLZ).

Also, it was recently revealed that Berkshire has converted its Bank of America (BAC) warrants into 700 million shares of common stock.  They originally purchased the warrants back in 2011 when Buffett invested $5 billion via preferred shares.

The warrants converted at $7.14 each and shares now trade above $23.  This makes Berkshire the biggest shareholder of BAC.  Buffett said he likes the business, likes the valuation and likes management.


Video 1 on Hurricane Harvey / Insurance business

Video 2 on Hurricane / Insurance

Video 3 on economy/GDP

Video 4 on Bank of America (BAC) & Wells Fargo (WFC)

Video 5 on the President

Warren Buffett Interview With PBS

Berkshire Hathaway's Warren Buffett recently sat down with Judy Woodruff of PBS for an interview on a wide range of topics like the economy, income inequality, taxes and more.

Here's the video of part 1 of the interview:



And here's the video of part 2 of the interview:



For more on Buffett, we've also highlighted some recent buying activity from Berkshire Hathaway.

Berkshire Hathaway Invests in Home Capital Group and Store Capital

News has recently come out that Warren Buffett's Berkshire Hathaway has made two recent investments:

Berkshire Hathaway Invests in Home Capital Group (HCG)

First, Berkshire will indirectly purchased C$400 million of Home Capital shares via a private placement (40 million shares at around C$10 per share).  Additionally, Berkshire will give the company a C$2 billion line of credit.

Of the investment, Buffett said, "Home Capital's strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment."

Berkshire will own just over a 38% equity stake in the company.  The company had been undergoing a strategic review as it sought ways to raise capital.

Home Capital had been a popular short among investors betting that Canada could see fallout from a subprime housing crisis of its own.  Buffett has clearly zagged the other direction with this bet.

After falling 45% over the past six months, HCG shares are now up 82% over the past few weeks.

For more on Berkshire Hathaway, we highlighted an interview with Warren Buffett last month.

Per Google Finance, Home Capital is "Canada-based holding company that operates through its subsidiary, Home Trust Company (Home Trust), which offers deposits, residential and non-residential commercial mortgage lending and consumer lending. It offers deposits through brokers and financial planners, and through its direct-to-consumer deposit brand, Oaken Financial. Home Trust, through its subsidiary, Home Bank, offers mortgage, deposit and personal banking products. Its mortgage lending includes Traditional Single-family and ACE Plus Lending; insured residential lending; residential commercial lending, and non-residential commercial lending. Its consumer lending includes credit card and line of credit lending, and other consumer retail lending. In addition it manages a treasury portfolio to support liquidity requirements and invest excess capital. Its operations also include Payment Services Interactive Gateway Inc., the Company's subsidiary involved in payment processing."


Berkshire Invests in Store Capital (STOR)

Secondly, Warren Buffett's firm has also made a bet on another industry that's seen some struggles: physical retail.  While it's not an actual retailer, it still has exposure to the industry as it's a REIT focused on single tenant commercial operational real estate. 

Berkshire has invested $377 million in Store Capital (STOR) according to the company, which turns out to be around a 9.8% stake.  The private placement issued 18.6 million shares at $20.25 per share.

Per Google Finance, Store Retail is "an internally managed net-lease real estate investment trust. The Company is engaged in the acquisition, investment and management of single tenant operational real estate (STORE) properties. As of December 31, 2016, the Company owned a portfolio that consisted of investments in 1,660 property locations operated by 360 customers across 48 states. Its customers operate across a range of industries within the service, retail and manufacturing sectors of the United States economy, with restaurants, early childhood education centers, movie theaters, health clubs and furniture stores. The Company's portfolio includes investments in approximately 1,330 property locations operated by over 300 customers across approximately 50 states. The Company provides real estate financing solutions principally to businesses that own STORE properties and operate within the broad-based service, retail and industrial sectors of the United States economy."

For more from Warren Buffett, we've highlighted other Berkshire Hathaway portfolio activity here.

Berkshire Hathaway Acquires More Liberty SiriusXM Shares Again

We've highlighted recently that Warren Buffett's Berkshire Hathaway has been buying Liberty Sirius XM (LSXMA / LSXMK). Well, they're at it again.

Per Form 4's filed with the SEC, Berkshire acquired 377,656 shares of LSXMA across May 26th, 30th, and 31st at weighted average prices around $41.xx. After these buys, they own over 14.86 million LSXMA shares.

The second Form 4 indicates they also bought 644,172 LSXMK shares on May 26th, 30th, and 31st at weighted average prices ranging from $40.9877 to $41.7432. After these buys, they own over 31 million LSXMK shares.

We've also previously noted that it seems likely that Berkshire's portfolio manager Ted Weschler is the one buying here.

For more on Berkshire Hathaway, check out a recent interview with Warren Buffett here.

Per Google Finance, Liberty SiriusXM is "Liberty Media Corporation owns interests in subsidiaries and other companies, which are engaged in the media and entertainment industries. The Company's principal businesses and assets include its consolidated subsidiaries Sirius XM Holdings Inc. (SIRIUS XM) and Braves Holdings, LLC (Braves Holdings), and its equity affiliate Live Nation Entertainment, Inc. (Live Nation). The Company's segments are SIRIUS XM, and Corporate and other. SIRIUS XM provides a subscription-based satellite radio service. Through its subsidiaries and affiliates, the Company principally operates in North America. The Company also owns a portfolio of minority equity investments in publicly traded media companies, including Time Warner, Inc. and Viacom, Inc. SIRIUS XM transmits music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through two satellite radio systems."

Berkshire Hathaway Adds To Liberty SiriusXM Again

Warren Buffett's Berkshire Hathaway has filed two separate Form 4's with the SEC regarding its position in two share classes of Liberty SiriusXM (LSXMA / LSXMK). 

Per the filing, Berkshire was buying shares of both on May 18th, 19th, and 22nd.  They acquired 492,156 shares of LSXMA at weighted average prices ranging from $37.1826 to $38.8041.  After these buys, they owned over 14.15 million LSXMA shares.

They also bought 679,930 shares of LSXMK at weighted average prices ranging from $36.8074 to $38.5003.  After these purchases, they now own over 29.77 million LSXMK shares.

This is the second month in a row that Berkshire has bought LSXMA / LSXMK shares.  We highlighted then how Ted Weschler (one of Berkshire's portfolio managers) seems to be the lead investor here.

For more from Berkshire, be sure to check out a recent interview with Warren Buffett and Charlie Munger.

Per Google Finance, Liberty SiriusXM is "Liberty Media Corporation owns interests in subsidiaries and other companies, which are engaged in the media and entertainment industries. The Company's principal businesses and assets include its consolidated subsidiaries Sirius XM Holdings Inc. (SIRIUS XM) and Braves Holdings, LLC (Braves Holdings), and its equity affiliate Live Nation Entertainment, Inc. (Live Nation). The Company's segments are SIRIUS XM, and Corporate and other. SIRIUS XM provides a subscription-based satellite radio service. Through its subsidiaries and affiliates, the Company principally operates in North America. The Company also owns a portfolio of minority equity investments in publicly traded media companies, including Time Warner, Inc. and Viacom, Inc. SIRIUS XM transmits music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through two satellite radio systems." 

Warren Buffett, Charlie Munger & Bill Gates Interview

Becky Quick on CNBC recently sat down with Berkshire Hathaway's Warren Buffett for a one-on-one interview and then was later joined by Charlie Munger and Bill Gates for a discussion on a myriad of topics.  Here are some highlights:

Warren Buffett's Interview

-  Talked about technology stocks a lot at Berkshire's annual meeting.  Munger said they missed Google (GOOGL) and Buffett thought they should have had some insight into it because GEICO was a heavy user of it for advertising and paying per click.  He wasn't sure if there was a first mover advantage or if increased competition was going to come along (Bing, etc) or if there were going to be technological advances he couldn't understand.  "If I were forced to buy it or short it, I'd buy it.  Same with Amazon."

-  Apple (AAPL) shares were much more reasonable compared to future earnings so that's why he bought that tech stock.  Likens the consumer nature of the product as a way for him to easily tell what's going on with customer preference.  "You can't move people by price in the smartphone market remotely like you can in appliances ... the loyalty is huge."  Notes that most items are price sensitive (TVs, etc) but AAPL's products don't seem to be.

-  Recently highlighted how Buffett sold some IBM and he said that they've experimented with IBM's Watson at GEICO.  In that space you have to worry about somebody coming in and jumping ahead with the utility.  "The biggest value will come when it replaces human labor." 

-  Doesn't make trades on the basis of political election outcomes, doesn't look much at quarterly GDP numbers.

-  Railroad figures show the economy is doing 'OK', 2% rate or so.  Natural gas has gone up in price so that dictates the use of goal a lot of places, so coal shipments are up the most % wise. 

- Housing market is getting better, but not 'booming.'   Berkshire owns Clayton homes (manufactured homes), Acme brick, Berkshire Hathaway realty, Shaw flooring, Benjamin Moore paints. 

-  "Credit card volume will tell you a lot about the consumer., what their attitude is."

-  "Packaged goods has generally been a very profitable business."

-  Largest investor in four major airlines (UAL, DAL, AAL, LUV): Airlines have found a very high percentage of customers are price conscious.  Yet most consumers are captive to whatever airline flies the route they need to take.  Thinks consolidation of the industry has helped and it's no longer a 'suicidal business.'

-  "I have no idea what the market will do in the short-term."  They've got $95 billion sitting around and it doesn't make him happy that he's not earning anything on it.  Says it's getting tougher to buy businesses these days, "Once you buy a business, the business doesn't know what you paid for it."  "It's a very tough period to allocate capital."

- Says he's still cheap but not as cheap as he used to be. "You can afford to overpay a bit for a really fine business depending on your degree of certainty that it's a really fine business."

- Buffett says one thing he mentioned at the annual meeting no one really appreciated: that the five largest businesses today by market value ($2.5 trillion or more) you could run those businesses with no equity capital.  That's a completely different world than the past when industrial giants needed a lot of capital.

-  Didn't buy Amazon (AMZN) because of "stupidity."  Says he was impressed by Bezos long ago but didn't think he could pull off what he has.  On shares currently: "It's a big valuation ... I'm not buying any.  These are powerful ideas with big potential and he's executed."

-  One essential factor that determines what he thinks about market valuations: "The most important item over time in valuation is obviously interest rates."  "Anybody that prefers bonds to stocks today is making a big mistake.  It's ridiculous for somebody to buy a 30 year bond at these rates."

-  "Every smart guy is tempted by leverage, and some of them are broken by it."



Then at the end of Buffett's 1-on-1 interview, Charlie Munger and Bill Gates also joined Buffett to talk about healthcare, tax reform, mistakes they've made, and other topics.


Embedded below is the video of Warren Buffett, Charlie Munger, and Bill Gates's interview on CNBC:



For more from these investors, be sure to check out Warren Buffett's recommended reading list as well as Charlie Munger's favorite books.

Warren Buffett Sells One Third of IBM Stake

On the heels of Berkshire Hathaway's annual meeting, CNBC's Becky Quick has reported that Warren Buffett has sold about a third of his stake in IBM (IBM) in the first and second quarters of 2017. 

Buffett is quoted as saying, "I don't value IBM the same way that I did six years ago when I started buying ... I've revalued it somewhat downward."

It seems that once IBM started trading above $180 they started selling. 

Buffett cited increased competition as one of the main drivers of his decision.  Berkshire still owns over 50 million IBM shares.

In other recent portfolio activity, we highlighted how Berkshire Hathaway had been buying Liberty SiriusXM.

Per Google Finance, IBM is "a technology company. The Company operates through five segments: Cognitive Solutions, Global Business Services (GBS), Technology Services & Cloud Platforms, Systems and Global Financing. The Cognitive Solutions segment delivers a spectrum of capabilities, from descriptive, predictive and prescriptive analytics to cognitive systems. Cognitive Solutions includes Watson, a cognitive computing platform that has the ability to interact in natural language, process big data, and learn from interactions with people and computers. The GBS segment provides clients with consulting, application management services and global process services. The Technology Services & Cloud Platforms segment provides information technology infrastructure services. The Systems segment provides clients with infrastructure technologies. The Global Financing segment includes client financing, commercial financing, and remanufacturing and remarketing."

Berkshire Hathaway Buys More Liberty SiriusXM

Warren Buffett's Berkshire Hathaway has submitted a couple of Form 4's with the SEC regarding its position in Liberty Sirius XM (LSXMA / LSXMK). 

Per the filings, Berkshire was out buying both the Series C stock (LSXMK) and the Series A stock (LSXMA).  They purchased over 3.87 million LSXMK shares across April 20th, 21st, and 24th at weighted average prices between $38.7043 and $40.62.  After these buys, Berkshire now owns 27.23 million shares of LSXMK.

They also bought over 2.47 million LSXMA shares in total across the same dates at weighted average prices between $38.6046 and $40.795.  After these buys, they now own over 13.15 million LSXMA shares.

Liberty Media's Greg Maffei also tweeted: "Nice to have Berkshire, Warren B, and Ted Weschler step up their $LSXMA investment.  Thanks.  $SIRI. #hearmysiri." And then followed it up with: "Forgot to bow to altar: $BRK.A #OmahaRules."

Given that Ted Weschler was mentioned as the investor involved in this name, it seems natural to draw similarities to a past position of his.  At his old hedge fund Peninsula, Weschler previously owned DirecTV and a large part of the thesis there was a levered buyback.  Given that Sirius XM seems to be following a similar playbook, it seems plausible that this is one of the reasons Weschler is attracted to this name as there are some similarities.  Not to mention, Sirius XM has grown subscribers consistently over the past 7 years.

Per Google Finance, Liberty Sirius XM "owns interests in subsidiaries and other companies, which are engaged in the media and entertainment industries. The Company's principal businesses and assets include its consolidated subsidiaries Sirius XM Holdings Inc. (SIRIUS XM) and Braves Holdings, LLC (Braves Holdings), and its equity affiliate Live Nation Entertainment, Inc. (Live Nation). The Company's segments are SIRIUS XM, and Corporate and other. SIRIUS XM provides a subscription-based satellite radio service. Through its subsidiaries and affiliates, the Company principally operates in North America. The Company also owns a portfolio of minority equity investments in publicly traded media companies, including Time Warner, Inc. and Viacom, Inc. SIRIUS XM transmits music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through two satellite radio systems. "

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.