10 Highlights of Warren Buffett on CNBC – February 25, 2019
Warren Buffett was interviewed on CNBC today from 6 – 9 a.m. ET. The 10 highlights were:
(1) Berkshire overpaid for Kraft Heinz which is losing pricing power and market share to private label brands such as Kirkland (Costco). Berkshire is not planning to either buy or sell shares in Kraft Heinz.
(2) Ajit Jain and Greg Abel each received $18 million as compensation in 2018. Todd Combs and Ted Weschler each manage $13 billion, are slightly underperforming the S&P 500, but assist with acquisitions and are outperforming Buffett.
(3) If 30 year U.S. Treasury bonds continue to yield only 3% for the next 10 years, then stocks are undervalued.
(4) He prefers lower prices for Apple so they can buy back more shares with their $130 billion in cash.
(5) Berkshire’s average cost of Apple = $141 per share and would buy additional shares only at lower prices than the current price of $174.
(6) Banks and financials are good businesses selling at attractive prices. He praised Bank of America and JP Morgan Chase.
(7) The inequality gap is widening and needs to be addressed, but we should not do anything to the goose laying golden eggs.
(8) He would support Mike Bloomberg for President. Howard Schultz should not run as an independent since he would more likely take votes from the Democrat since his views are closer to that party. We should have just two major candidates for President (Democratic and Republican parties).
(9) The decision to buy and sell Oracle was Buffett’s since he felt he did not understand the business and cloud well enough.
(10) He is not big fan of IPO’s.
Mr Buffett made clear that Heinz Holding Company overpaid for Kraft; but that BRK and 3G had not overpaid for Heinz. He makes a distinction between the two purchases.
The distinction is important as Wall Street marks the Kraft half of the equation down to virtually worthless [spoiler: its not worthless], which is implied by talking a stock down to a point that is almost completely supported by Heinz’s value alone.
The fundamental disconnect between accounting and economics may be pending: if the Kraft Foods side of the business takes another multi-billion dollar non-cash charge for intangible impairments (plausible for 4Q 2019), we may see a stock price that not only treats Kraft Foods as worth $0, but one that signficantly discounts Heinz’s value, despite that half of the equation having no impairment charges and continuing to generate respectable, if not strong, operating profits.