Stocks overpriced - U.S. investor Warren Buffett
By Andrew Stern
OMAHA, Neb., May 2 (Reuters) - Billionaire investor Warren
Buffett, warming up before his investment company's annual
meeting, said on Sunday there were few companies now that met
his test of being a good business whose stock sold at an
"intelligent" price.
"We never had a view on the stock market. We do try to buy
businesses at intelligent prices. We find very few things that
meet that test," Buffett, the second-wealthiest American,
behind Microsoft founder Bill Gates, told reporters at a news
conference a day before the annual meeting of his multifaceted
conglomerate, Omaha-based Berkshire Hathaway Inc.
"But that is not a market prediction. Those valuations
could continue for many years. They could go higher, for that
matter," he said.
Buffett, nicknamed the "Oracle of Omaha," and his business
partner Charlie Munger dispensed broad investment advice
sprinkled with homespun adages over more than two hours of
questioning.
Buffett remained vague on comments he made in Britain last
month about plans to invest in a British blue-chip company --
comments that triggered feverish speculation about which
company it might be.
Among the companies British bookmakers were taking bets on
were retailer Marks and Spencer Plc. , British Airways
and Cadbury Schweppes Plc.
"It starts with the letter A through Z. ... It's not a
bombshell," Buffett said. "We've said more than we intended to
say."
Buffett said he was more familiar with British-based
companies than French or German ones but basically believed
that all industrialized countries had a few excellent firms
large enough to absorb a Berkshire Hathaway investment foray.
"In some cases, the prices look more reasonable over there than
they do over here," he added, but he cautioned that few met his
criteria at the moment.
So-called "emerging markets" rarely had companies large
enough to handle Berkshire's usual minimum investment of $500
million, Buffett said. He said he was beaten to the punch by a
quicker investor after he disclosed plans last year to buy into
a still-unnamed Japanese company.
Buffett said one thing he possessed was patience when it
came to investing, though he admitted to having made mistakes
of omission in not pulling the trigger on certain moves. Part
of his job, he said, was investing the huge amount of capital
accumulated by Berkshire, whose current cash position is
estimated by observers at $15 billion.
"Buying stocks is the best game in the world. It's a
no-strike game. If the ball comes right down the middle and you
don't swing, you don't get a called third strike," he said.
"But it's hard when your fans are telling you to 'swing, you
idiot.' We are structurally immune from that pressure, and the
trick is to be psychologically immune as well."
Buffett said he was "suspicious" of sharp rises in the U.S.
stock market, a repeated pattern that "leads to excesses."
"It's safe to say we really don't like the go-go periods
where you get waves upon waves of irrational buying," Munger
added.
"There's a long history of (investment) bubbles, yet we
keep having them," Munger said. "I must say, it's kind of
irritating when the mania is widespread," he noted..
Munger said he was going out on a limb but responded in the
affirmative when asked whether his words applied to the
meteoric rise in so-called Internet stocks. Buffett reiterated
that he did not "understand" Internet stocks and so refrained
from investing in them.
Besides Berkshire's long-held profitable investments in
such giants as Coca Cola Co. , Gillette Co. ,
American Express Co. , Walt Disney Co. and Wells
Fargo and Co. , Berkshire owns auto insurer GEICO Co., a
few real estate investment trusts and some smaller operations
like a candy company.
Buffett said he expected the profits of personal auto
insurers like GEICO to decline in coming years because of
certain factors related to company reserves, but he described
insurance as a solid, if mature, industry.
Buffett refrained from making projections about some of his
other holdings, which include millions of ounces of silver, or
the general direction of the economy or interest rates,
professing ignorance of the latter.
He said he was unconcerned about the price of Berkshire's
preferred stock, which stood recently at $76,300, down from a
year high of $84,000, saying he was only worried about the
company's "intrinsic value."
Buffett expressed disdain for U.S. corporate executives who
have showed an "increasing willingness" to bend accounting
rules, and he urged less involved investors to pay attention to
costs incurred by investment fund managers.
As for Berkshire's future, Buffett said the company was in
good hands and he had anointed two people as his successors in
the event he were to leave.
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