Part 1
On Internet stock valuations:“There will be enormous amounts of disappointment. The numbers of people buying these stocks to hold them are very few. I think 98% of them are being bought by people because they are going up. If these stocks stop going up, they’ll get out… Very few of these companies will be big winners in the long run. It’s the nature of capitalism not to get a lot of winners. You get a few.””With Coke I can come up with a very rational figure for the cash it will generate in the future. But with the top 10 Internet companies, how much cash will they produce over the next 25 years? If you say you don’t know, then you don’t know what it is worth and you are speculating, not investing. All I know is that I don’t know, and if I don’t know, I don’t invest.”
On technology stocks:
“How do you beat Bobby Fischer? You play him at any game but chess. I try to stay in games where I have an edge, and I never will in technology investing.”
“I do admire the management of Intel and Microsoft, but I don’t have a fix on where they will be in 10 years. I think it is harder to get a fix on those kinds of businesses. I don’t know how to value them. And if I started playing around without knowing how to value a company, I might as well buy lottery tickets.”
On economics:
“I am not a macro guy. I don’t think about it. If Alan Greenspan is whispering in one ear and Bob Rubin in the other, I don’t care at all. I’m watching the businesses.”
“I don’t read economic forecasts. I don’t read the funny papers.”
On mergers:
“I am very skeptical of most big mergers. The assumptions made tend to be very optimistic. People want to do deals — you start with that. There’s a lot of Darwin going on in companies. And people who get to the top want action. I’ve been on 19 boards in my life, and I’d say the great majority of deals that I’ve seen were not very good deals.”
On PaineWebber analyst Alice Schroeder’s research showing that Berkshire Hathaway is selling at a sizable discount:”I think she did a very thorough job. It seems to me she varied from the standard approach of securities analysts. But I don’t comment on the value. I don’t want anybody to come into Berkshire based on what I’m saying about the value of the stock. Our goal is to have the stock sell as close to the intrinsic value as possible, so that people come in and go out on the same basis.
On Coca-Cola (KO):
“I have a very strong feeling that Coca-Cola will dominate a much larger soft drink business 10 years from now than today. But in terms of the short run, I have no idea what will happen.”
On daytraders and other speculators:
“We try to communicate in a way that turns people off who have a crazy approach to stocks. It matters as much who you repel as who you attract. If we were sizably owned by day traders, we’d have crazy valuations in no time — and in both directions.”
On past mistakes:
“My biggest lost opportunity was probably Freddie Mac. We owned a savings and loan, and that entitled us to buy 1% of Freddie Mac stock when it first came out. We should have bought 100 S&Ls and loaded up on Freddie Mac. What was I doing? I was sucking my thumb.””The biggest cause of that kind of mistake [here, failing to buy more Citicorp in 1991], is that I stop buying when the stock starts moving up. I get so enamored of how cheap it was when I started buying that I stop. I have too often folded my tent. I believe in loading up on these things. There wasn’t anyone who thought Citibank was going to disappear. And there wasn’t anyone who thought it wasn’t cheap at $9 a share.””We’ve lost very little on errors of commission. The errors of omission are the big ones.”
Part 1