Warren Buffett: looking for an elephant

The Sage of Omaha is on the hunt for promising companies, but he may have to be patient.

936-Buffett-634
Warren Buffett, chairman & CEO, Berkshire Hathaway

Warren Buffett's Berkshire Hathaway investment vehicle is on the lookout for "an elephant-sized acquisition". The hunt for promising companies "is what causes my heart and [business partner Charlie Munger's] to beat faster... even at our ages of 88 and 95" (Buffett is the 88-year-old).

Unfortunately the "immediate prospects for that are not good", said Buffett in his latest letter to shareholders. "Prices are sky-high for businesses possessing decent long-term prospects". That "disappointing reality means that 2019 will likely see us again expanding our holding of marketable equities".

Reinforcing his reluctance to buy at a high price, Buffett in effect admitted to CNBC that Berkshire had overpaid for food giant Kraft Heinz, whose shares slid last week after reporting disappointing fourth-quarter results.

Kraft Heinz is still a wonderful business, says Buffett, but it would need to deliver a much higher return than it currently is to justify the price he paid for the shares. As it stands, Berkshire Hathaway had to absorb a $3bn loss last year from an "impairment of intangible assets" that arose almost entirely from its interest in Kraft Heinz.

Buffett does acknowledge that even firms bought for too high a price can show their worth eventually, if the business does well. "Investment performance converges with business performance. And... the record of American business has been extraordinary," he noted, though as always, he avoids predicting how stocks will perform in the short run.

Recommended

Great frauds in history: Carlton Cushnie’s befuddling Ponzi scheme
People

Great frauds in history: Carlton Cushnie’s befuddling Ponzi scheme

Carlton Cushnie set up a finance company which was valued at an estimated £230m, but made only one trade finance loan in its existence, which actually…
28 Oct 2020
Craig Newmark: the nerd who shook up the media giants
People

Craig Newmark: the nerd who shook up the media giants

Twenty-five years ago, Craig Newmark lost his job at a brokerage and fired off an email to friends. That seeded a venture, Craigslist, that dominates …
26 Oct 2020
Great frauds in history: the Independent West Middlesex Fire and Life Assurance Company's early Ponzi scheme
Investment strategy

Great frauds in history: the Independent West Middlesex Fire and Life Assurance Company's early Ponzi scheme

The Independent West Middlesex Fire and Life Assurance Company (IWM) offered annuities and life insurance policies at rates that proved too good to be…
21 Oct 2020
Mukesh Ambani: the Indian billionaire eyeing global expansion
People

Mukesh Ambani: the Indian billionaire eyeing global expansion

Mukesh Ambani is already the richest man in India by a large margin, but his ambitions do not end there. He wants India to be at the front of the worl…
19 Oct 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
Don’t miss this bus: take a bet on National Express
Trading

Don’t miss this bus: take a bet on National Express

Bus operator National Express is cheap, robust and ideally placed to ride the recovery. Matthew Partridge explains how traders can play it.
19 Oct 2020
Three stocks that can cope with Covid-19
Share tips

Three stocks that can cope with Covid-19

Professional investor Zehrid Osmani of the Martin Currie Global Portfolio Trust, picks three stocks that he thinks should be able to weather the coron…
12 Oct 2020