Warren Buffett has told his legion of Berkshire Hathaway shareholders that he is struggling to find investment opportunities outside of the US because owners aren't approaching him.
Create a free account to read this article
or signup to continue reading
"We have never turned down a chance to make a significant acquisition outside the US because of a feeling we would rather do something in the US," he said at the firm's annual general meeting which 40,000 shareholders attended in the Nebraskan town of Omaha.
"I am disappointed we haven't had better luck outside the US."
"We have not had as much luck getting on the radar screen from owners around the world. The best bet is to buy a business from the family of a founder of the founder, and in the US anyone with a business of size thinks of us and prefers us.
Buffett did say that record sales from Isreali specialised industrial goods maker Iskar, one of the few non-US firms Berkshire owns suggested that the global economy was stronger than people think.
"They are seeing strength in the business which is hard to say there is weakness in the rest of the world."
Asked to explain Berkshire Hathaway's failure to best its own yardstick, Munger said "If this is failure I want more of it."
Buffet, 83 and Charlie Munger, 90, faced questions about their acquisitions their deployment of capital and corporate governance, with Buffett's lack of action against excessive pay attracting particular focus.
Berkshire's most meaningful acquisition of 2013 was the $US23.6 billion of Heinz, the maker of ketchup. It teamed up with Brazilian private equity firm 3G raising questions about how a 'slash and burn; private equity methods would sit with Berkshire's less active approach in managing their businesses.
Buffett said that he would team up again with 3G, a firm he described as "marvellous and fair", to make large acquisitions in the future. But he said Berkshire needed to retain its culture.
"I don't think blending will work. Managers, when they work, are joining a business that is unlike anything else. It's a huge corporate asset and we want to maintain that message well beyond my lifetime," said Buffett.
Buffett hailed the actions of the US Federal Reserve in managing the economy out of the crisis and beyond.
"I am surprised at how well things are going. I don't think I would do things differently, It's worked well so. I said it was an interesting movie and we didn't know how it end but I think Ben Bernanke was a hero at the time of the crash and subsequently."
He said that while low interest rates had impacted asset prices, he did not believe it had created undue dangers to financial stability.
"This is not a bubble situation at all but it is an unusual situation."
Buffett also beat back a question about weaknesses in the US economy.
"American business is doing extraordinarily well," he said.
"[Anyone that doubts this] should just look at corporate profits. They should look at a chart of corporate taxes as a per cent of GDP down from 4 to 2 per cent.
"American business earnings on net tangible assets are basically the envy of the world."
Buffett revealed that his $US1 million dollar bet made six years ago that an S&P index fund would beat a select group on hedge funds over 10 years looks a winner. The index has posted cumulative returns of 43 per cent, against around 13 per cent for the group of hedge funds.
Buffett and Munger were also asked to explain their failure to beat their own yardstick of outperforming the market index over five years. Buffett said he explained in 2013 that if the stock market had another strong year, they would miss out but over the cycle they would ultimately outperform. Munger said the firm was still producing excellent returns on assets.
"If this is failure I want more of it," he said.
THE WIT AND WISDOM OF BUFFETT AND MUNGER
Buffett and Munger on Sees Candy and the value of brands
"Sees Candy opened our eyes to the power of brands. There is nothing like owning a brand to educate you. In 1988 we bought Coca Cola and we might not have done so if we not owned Sees." – Buffett
"Sees main contribution was ignorance removal. We were barely smart enough to buy it. If there's any secret we have, its ignorance removal. And the nice thing is we still have a lot of ignorance left to remove." – Munger
Buffett and Munger on capital allocation
"Capitalism is about the allocation of capital and we have a system were we can allocate capital without tax consequences. We can move money as the text books say to where it can be usefully deployed, like wind farms. It makes good sense but it has to be applied with business like principles not stock promotion principles." – Buffett
"We will get more automatic intelligent redeployment of capital in railroads and energy and that's good for shareholders." – Munger
"Cash and Credit is like oxygen. You don't notice it 99 per cent of the time but if it's absent you notice it straight away. We will keep $20bn and we will never worry about any event that will prevent us from playing our game." – Buffett
Munger on Berkshire's weaknesses
"We over-trust carefully selected people and its worked very well for us.,"
Munger on teaming up with private equity
"I don't think we have ever had a policy that loves overstaffing."
Buffett and Munger on climate change
"I don't think in making a decision on Berkshire and other companies that climate change should be a factor in the decision making.
"A lot of people are over-claiming that they know the impact. We are agnostic. It's not there isn't global warming because there is, but those that say they know its impact are talking out of their hats."
Munger on the impact on greater disclosure on executive pay
"Corporate CEOS as a group would be paid a lot less if proxy statements didn't reveal how much they are getting. American shareholders are paying a significant price to be able to see how much the top five earners are making.
"We are way better off without adding to the culture of envy."
Buffett on Munger
"He is my canary in the coalmine. He turned 90 and I find it encouraging how he is handling middle age."
Munger on succession
"I wish my main problem in life was fear of succession problems. I think we are in very good shape."
Buffett on the nature of corporate boards
"The nature of boards is that they are part business and part social and people behave sometimes with their business brain and sometimes with their social brain."
