I’ve been asked on and offline for some more info on the Q&A with Buffett. Here is a quick recap of the main points:
1. Buffett was asked about the Kraft deal for Cadbury. It was clear from his response that he was unhappy with the way things transpired, especially the ending price and the way Kraft structured it so they did not need his approval. As he said, “I only own about 10% or $4B in the company. Why should they ask me.”
His basic complaint was why sell a profitable pizza business and take a huge tax hit to overpay for something else? As he said, “You can overpay for Coke if you had to. Kraft overpaid for Cadbury.”
2. Inflation. Buffett stated that he believes we will have much stronger inflation over the next 5-10 years in the US for a variety of reasons. That said, inflation in and of itself is not such a bad thing so long as it is accompanied by economic growth.
3. Real Return. A student asked Buffett what sort of real return he should expect from an investment. He said 4%. Factor in inflation, taxes, and that quickly looks more like a 10% or more gross return. I’d take that too.
4. Investment Return. Buffett was asked how would he invest $1m today. He said that right now was the best investment environment he’d seen since the 1970s–then clarified it to say it was probably the best ever. What sort of return would Buffett expect of himself with only $1m? 50%!
5. Where to invest in equities. Although Buffett would not address this question directly, he remarked that on a past Sunday he had sat down and read through hundreds of financials on South Korean companies. He picked out a few with good EPS and cash on hand and invested in them. I believe it was a strong hint that for small cap companies the best opportunities will be found abroad for our generation.
All in all, Buffett is a very loqaucious public speaker. Listening to him it’s easy to get lulled into thinking that investing is easy! After all, it all sounds so simple in his calculus.
Read the full article: Will and Warren (Part 3)