Warren Buffett: I Don't Know When To Buy Stocks | August 30, 2018

Transcript

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Summary

In this video, Warren Buffett discusses various topics including the annual Glide Foundation lunch auction, stocks and the market, Berkshire Hathaway's investment in Apple, buying back shares, the economy, tariffs, quarterly reporting, and his views on Twitter.

Questions & Answers

Q: What subjects does Warren Buffett talk about during the annual Glide Foundation lunch?

Warren Buffett talks about a variety of subjects during the annual Glide Foundation lunch, including family, children, raising kids, and topics of interest to the individuals he is dining with. It is not limited to discussions about stocks, business, or finance.

Q: Do stocks look expensive to Warren Buffett at the current prices?

According to Warren Buffett, stocks are definitely more attractive than fixed income securities such as bonds. He explains that over time, businesses that earn high returns on capital will outperform a fixed bond. While he acknowledges that stocks may not go up or down in the short term, he believes that they are a better investment choice compared to bonds.

Q: What factors make stocks look attractive currently?

Warren Buffett states that stocks look attractive when compared to fixed income securities because they offer a higher potential return. He explains that American equities, which represent American businesses worth $30 trillion, appear cheaper compared to real estate. The ability of stocks to generate higher returns on capital makes them more appealing.

Q: Have investors been asking Warren Buffett for stock picks during these lunches?

According to Warren Buffett, it is not common for investors to ask him for stock picks during these lunches. Instead, the conversations often revolve around family, children, and various other topics that interest the individuals he is dining with.

Q: Does Warren Buffett still buy stocks, despite the market being at all-time highs?

Yes, Warren Buffett continues to buy stocks. He mentions that he has been buying stocks since 1942 and has done so under various political administrations. He emphasizes his preference for owning an interest in a variety of great businesses over fixed income securities, such as bonds.

Q: Is Warren Buffett still buying shares of Apple?

Warren Buffett reveals that he has bought a small number of Apple shares since the last filing. While he wishes to buy them at cheaper prices, he acknowledges that he benefits when the stock goes down, as Apple tends to buy back more shares. He considers Apple an attractive investment option.

Q: How does Warren Buffett view Apple's stock and its impact on consumers?

Warren Buffett believes that Apple's stock offers great value considering its utility to consumers. He mentions that hundreds of millions of people rely on their iPhones for various activities, making it an indispensable part of their lives. He compares the value of an iPhone to his own personal expenses, highlighting its remarkable utility and affordability.

Q: Does Warren Buffett view Apple primarily as a tech company?

Warren Buffett looks at Apple's products, such as the iPhone or iPad, from the standpoint of how valuable they are to users. He believes that Apple needs to continue producing products that its vast clientele considers indispensable. He emphasizes their functionality and the need for Apple's replacement products to be considered highly desirable.

Q: Are airline stocks still attractive to Warren Buffett?

Warren Buffett mentions that Berkshire Hathaway owns nine percent of the four largest airline stocks. He would like to buy more, but they are limited by the ten percent ownership threshold. While he believes airlines are attractive investments, he has to trim his positions if the companies repurchase their own shares to avoid exceeding the ten percent limit.

Q: Does Warren Buffett believe the recent strategic initiatives by Campbell's make it an attractive acquisition target?

Warren Buffett comments that selling off certain units may change the attractiveness of Campbell's for potential buyers. The value would depend on whether the assets being sold are worth fair value and if there are any tax implications associated with the transaction. He states that the packaged goods industry is tougher now than it was ten years ago, affecting the long-term potential of such companies.

Q: Would Berkshire Hathaway be interested in acquiring Campbell's?

Warren Buffett mentions that Berkshire Hathaway would not be interested in acquiring Campbell's since they already own Kraft Heinz. He explains that offering a significant premium for a packaged goods company may not make financial sense. While branded packaged goods offer high returns on tangible assets, the battle with retailers and consumers' changing habits make them less attractive for future growth.

Q: Has Berkshire Hathaway bought back any of its own stock since changing its policy?

Warren Buffett confirms that Berkshire Hathaway has bought back a small amount of its own stock since changing its policy to tie it to intrinsic business value rather than book value. He mentions that he and Charlie Munger are always in sync regarding their buyback decisions, ensuring that it is in the best interest of the continuing shareholders.

Q: What does Warren Buffett think about the current state of the economy and the consumer?

Warren Buffett believes that the economy has progressively improved since the fall of 2009. While the growth has been consistent, he mentions that American households have a significant amount of wealth, which supports a strong consumer environment. He acknowledges that businesses are doing well across the board.

Q: Have trade tariffs impacted Berkshire Hathaway's businesses with higher costs?

Warren Buffett confirms that trade tariffs have had an impact on Berkshire Hathaway's businesses. He mentions that they have seen higher costs in areas such as raw materials, including steel and building materials. However, the full extent of the impact directly tied to tariffs versus inflation is still uncertain.

Q: What are Warren Buffett's thoughts on the Federal Reserve and interest rate hikes?

Warren Buffett expresses his confidence in Federal Reserve Chairman Jay Powell and believes that he is doing a terrific job. He emphasizes that Powell has access to more figures and data than he does and will make decisions in the best interest of the American economy. He supports Powell's role in setting interest rates.

Q: What is Warren Buffett's opinion on quarterly reporting and potential changes to reporting frequency?

Warren Buffett explains that while he likes reading quarterly reports as an investor, he does not support the practice of providing earnings guidance. He believes that quarterly reporting is valuable, but the focus should be on reporting the figures rather than promising specific outcomes. He emphasizes the importance of having a margin of error in reporting and avoiding the game of earnings guidance.

Q: Why does Warren Buffett choose not to use Twitter frequently, despite the popularity of the platform among CEOs?

Warren Buffett sees no reason for him to use Twitter frequently, as he does not have a daily view on all kinds of things. He believes there are more important things in life to focus on and does not see the need to share his opinions regularly through tweets. He appreciates the copycat or imitator who may be putting out better advice than he would, jokingly mentioning that if someone gives good advice, he'll take credit for it.

Q: How does Warren Buffett use his iPad?

Warren Buffett keeps his iPad on his desk and primarily uses it to check financial market information during the day. He values the convenience and ease of accessing information through the device. While he acknowledges the usefulness of the iPad, he mentions that he prefers reading over listening to podcasts due to time constraints.

Q: What has Warren Buffett learned from Tom Murphy?

Warren Buffett expresses his admiration for Tom Murphy, stating that he has made him a better person. He considers Tom Murphy and Charlie Munger as the right heroes to have in life. He appreciates Tom Murphy's influence on him, not just in business but as a human being.

Q: Does Warren Buffett agree with changing from quarterly reporting to six-month reporting cycles?

Warren Buffett prefers reading quarterly reports as an investor and appreciates the insights they provide. He believes that quarterly reporting is valuable, but considers guidance to be a problem. He encourages companies to avoid providing specific guidance, as it often leads to negative consequences.