Warren Buffett: We Don't Want Any Day Traders | May 6, 2011

Transcript

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Summary

This video features an interview with Warren Buffett discussing various topics such as the recent Massachusetts election, the volatility of Berkshire Hathaway stock, and the strategies behind the company's business acquisitions.

Questions & Answers

Q: What does the Massachusetts election results tell us?

The election results reflect the dissatisfaction of people with the current state of affairs. They perceive high unemployment rates, mortgage problems, and general negativity. This discontent is directed towards congress, banks, the administration, and even the healthcare bill. While this sentiment may be misguided, it does send a message that needs to be addressed.

Q: How does Warren Buffett want investors to view Berkshire Hathaway shares?

Warren Buffett wants investors to view holding Berkshire Hathaway shares as owning a piece of a farm or an apartment house that they intend to hold forever. The company aims to attract long-term shareholders who align with their vision, values, and time horizons.

Q: How does Warren Buffett feel about the volatility and increased trading volume of Berkshire Hathaway stock?

Warren Buffett acknowledges that the current volatility and increased trading volume of Berkshire Hathaway stock are not ideal. The company's preference is to have long-term shareholders who are aligned with their investment approach. While the recent activity may create some unease, he remains optimistic about attracting the right kind of shareholders in the long run.

Q: Why does Berkshire Hathaway issue B shares to acquire companies like Burlington Northern instead of using cash reserves?

Berkshire Hathaway issues B shares as a means of acquisition when it is the only viable option. While Warren Buffett and the board of directors are not fans of issuing shares, it becomes necessary to complete the deals. In the case of Burlington Northern, Berkshire Hathaway is using $22 billion cash in what they believe is an effective manner, without selling off any of their existing businesses.

Q: Will Berkshire Hathaway use the liquidity from the stock split to acquire more businesses?

Yes, Berkshire Hathaway plans to continue acquiring businesses using available resources. Warren Buffett expresses his commitment to buying businesses as long as he is alive. While they prefer cash transactions, there may be instances where stock is used, but the goal is to minimize stock usage.

Q: Can the issues with Kraft's purchase of Cadbury be compared to Berkshire Hathaway's acquisition of Burlington Northern?

The issues with Kraft's purchase of Cadbury differ from Berkshire Hathaway's acquisition of Burlington Northern. Kraft paid a premium for the acquisition and sold a pizza business in a tax-inefficient manner. The projected costs for the Cadbury acquisition were also estimated to be much higher. In contrast, Berkshire Hathaway is using cash and issuing shares for a deal that they believe is effective, without selling any existing businesses.

Q: Why was Warren Buffett against Coca-Cola's acquisition of Quaker Oats?

Warren Buffett was against Coca-Cola's acquisition of Quaker Oats because he did not find it to be a good fit for the company. He cannot comment on the current success of that specific acquisition, but he believes it was a good decision for Coca-Cola to pass on it.

Takeaways

In summary, the Massachusetts election results reflect the public's discontent with the current state of affairs. Warren Buffett emphasizes the importance of attracting long-term shareholders who align with Berkshire Hathaway's investment philosophy. The recent volatility and trading volume of Berkshire Hathaway stock are not ideal, but the company remains focused on its long-term goals. Berkshire Hathaway's acquisitions, such as Burlington Northern, are carefully considered and aim to utilize cash effectively without compromising existing businesses. Warren Buffett continues to advocate for acquiring businesses as long as he is alive, with a preference for cash transactions and minimal use of stock. The comparison with Kraft and Coca-Cola acquisitions reinforces the idea that each acquisition must be carefully evaluated based on its fit and potential for success.