Warren Buffett: Coca-Cola Compensation Plan Was Excessive | April 24, 2014 | Summary and Q&A

Transcript

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Summary

In this interview, Warren Buffett discusses various topics such as his abstention on the Coca-Cola compensation vote, his perspective on IBM's performance, the impact of cloud computing on the tech industry, the value in the equities market, the role of activist investing, the importance of businesses earning good returns on capital, and his thoughts on a potential tech bubble.

Questions & Answers

Q: Why did Warren Buffett abstain on the Coca-Cola compensation vote?

Buffett didn't approve of the size of the proposed plan, which was 500 million shares over four years. He felt this was excessive compared to what had been done in the past, with authorizations lasting six years for smaller numbers of shares.

Q: Did Warren Buffett voice his concerns privately with Muktar Ken or any other Coca-Cola executives?

No, Buffett didn't discuss his concerns with them before abstaining from the vote. However, he mentioned that he wouldn't have voted to abstain without informing them first.

Q: How does Warren Buffett feel about IBM's tough first quarter?

Buffett doesn't view IBM's first quarter as particularly tough. He states that their pre-announced earnings and the predicted impact of layoffs were in line with expectations. While currency neutral revenues were down, he acknowledges their ongoing challenges with the hardware division.

Q: Can IBM successfully transition into the cloud computing sector?

Warren Buffett acknowledges the growing shift towards cloud computing, but he doesn't directly invest in the cloud sector. While IBM is also moving into it, he believes it's a fight that's still ongoing and its ultimate impact is uncertain.

Q: Does Warren Buffett see value in the equities market?

Yes, Buffett is perfectly happy with the equities he currently owns, which amount to over $100 billion. He sees no reason to sell any of them and doesn't specify any particular sectors offering high value at the moment.

Q: Is activist investing helpful for long-term investors?

Warren Buffett believes that as an investor, what matters is the long-term performance of the businesses he owns. While he pays attention to market trends, he focuses on how businesses generate returns on capital over time rather than short-term market fluctuations or activist investors.

Q: Does activist investing increase shareholder value?

Warren Buffett's primary focus is on businesses earning good returns on capital. While activist investing could potentially increase shareholder value, its impact should be measured by the business's ability to improve its future profitability rather than short-term market reactions.

Q: Does Warren Buffett see a bubble in the tech world?

Buffett doesn't see a large bubble in the current stock market, unlike the late 1990s when people were buying tech stocks without understanding their true value. However, he doesn't rule out the possibility of a tech bubble in the future, although he doesn't see signs of it at present.

Takeaways

Warren Buffett abstained from the Coca-Cola compensation vote due to his concerns about the proposed plan's size. He expressed confidence in IBM's handling of its challenges and acknowledged the impact of cloud computing on the tech industry. While he sees value in the equities market, he doesn't reveal any specific sectors. Buffett emphasizes the importance of businesses earning good returns on capital, rather than short-term market trends or activist investing. Lastly, he doesn't currently perceive a large bubble in the tech world but remains open to the possibility in the future.