Warren Buffett, CEO of Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) conducted an extensive interview yesterday with Fox Business News. He discussed many topics including his investments like The Coca-Cola Company (NYSE:KO), Politics, Apple Inc. (NASDAQ:AAPL), and the recent shareholder meeting.
Below is the partial transcript of the interview (Rest embedded in Scribd after that):
STUART VARNEY, FBN HOST: Let’s go to Liz Claman in Omaha with, I believe, Warren Buffet and company, right?
LIZ CLAMAN, FBN CORRESPONDENT: You bet, from Varney and company to Warren Buffet and company.
Thank you so much.
Varney, you’ve got to watch this, because we’re going to talk about a lot of things that you and your viewers have talked about.
But first, we welcome Warren Buffet, the chairman and CEO of Berkshire Hathaway.
Thank you for being here.
WARREN BUFFET, CHAIRMAN AND CEO, BERKSHIRE HATHAWAY: Thanks for having me.
CLAMAN: Hey, the markets are open and trading.
CLAMAN: Let’s take a look because you said over the weekend — and you rarely say this — that Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s stock is undervalued. And as we look at how it’s trading, it is up slightly, about .5 percent.
What do you think of that trade?
Do you think it would have been higher, lower?
BUFFET: Well, that doesn’t change my conclusion, because of some half a percent. And, you know, I don’t — I have no idea whether Berkshire’s stock will go up or down in the next week or month or year.
But in relation to the businesses we own, it — it’s attractive.
CLAMAN: One of the number one questions that came out this weekend — it was interesting to me, because I’ve been coming six years and I have never heard so many people ask why isn’t Berkshire paying a dividend. This at a time when the largest percentage of S&P 500 companies are now paying dividends. It’s the first time in a long time that they are.
And then you have the fact that you own dividend paying stocks like Coca-Cola, American Express, Intel, which just raised its dividend this morning, by the way.
Why won’t you pay a dividend to your shareholders?
BUFFET: Well, we think our shareholders, five years from now, will be wealthier, counting what they would get from the reinvestment of the dividend. We think they would be — they’ll be wealthier if we hold onto the money.
Now, we may be wrong in that, but historically we’ve been right. And if — if we had paid a dividend over the years our shareholders would be considerably poorer than they — 10 years ago. And as long as we — I think we will have the opportunity to invest dollars, to create more than a dollar of present value, we’ll retain the money. And when we don’t think we can do that we’ll either repurchase stock or pay dividends.
CLAMAN: Is there no way you will ever pay a dividend?
BUFFET: Oh, some day Berkshire will pay a dividend because it will get so large that it can’t use the money, or all of the money that it earns, effectively.
But — but we don’t think we’re at that point, although we’re much closer to that point, obviously, than we were 20 years ago.
CLAMAN: I just mentioned that Coke pays a dividend. Speaking of Coke, the board is mulling a stock split.
Would you be for a stock split of Coca-Cola?
BUFFET: I’m — I’m totally neutral on that. It’s — it’s fine with me if they do and it’s fine with me if they don’t.
But it — it won’t make any difference to us in terms of the value of our Coca-Cola Company (NYSE:KO) stock.
CLAMAN: OK. The succession plan was a very major focus here. And you said you’d be very clear about it. You do finally have one person in mind, with two back-ups. I got you to tell us yesterday that it was a he.
CLAMAN: But it is a male?
BUFFET: It’s a male.
CLAMAN: It is a male. OK. I talked to some shareholders who said it is becoming increasingly evident to them that it’s Ajit Jain, who runs your insurance business. Keep going with the poker-faced one, because they say the insurance business is increasingly becoming the — one of the major important factors, the most important factors for the future of Berkshire and the profits that it brings in.
BUFFET: Look, I would say this about the insurance business. It’s been enormously important in getting us to where we are now. It’s still enormously important. It’s actually not as important relative to the entirety of Berkshire as it was 10 years ago. We’ve added more businesses away from insurance.
But insurance has driven us to where we are presently.
CLAMAN: And the culture, you said he understands the culture of Berkshire.
BUFFET: Oh, all three of the candidates understand the culture very well.
CLAMAN: All right. All three, but Ajit at the top?
BUFFET: Oh, I –
BUFFET: When — when we put you on the board, you’ll know.
CLAMAN: OK. All right. Only the board knows.
You also said about your successor that under your new successor, there will not be much of a derivatives book under Berkshire’s umbrella.
Is that because you feel you really understand derivatives in a way that nobody else does or that they’ve become dangerous for Berkshire?
BUFFET: Oh, it — it — there isn’t that much of a derivatives book right now, if you look at the total value of Berkshire. We’ve done very little in new revenues. But we have a few and one particularly good sized position in terms of our equity put situation. Only that’s nothing compared to what we have in equities overall.
So it’s not a big deal now. I would guess it would be a lesser deal. And — and partly that’s because the rule — in fact, in a big way that’s because the rules have been charged on derivatives. We would not have the derivatives position we have now if the rules had been the same five or 10 years ago in relation to posting of collateral. We think that — that derivatives become much more dangerous for the individual enterprise when they’re required to post collateral.
CLAMAN: OK. You’re 81 years old. That’s not any news to anybody. But the fact that you were diagnosed with Stage 1 prostate cancer gave some people a start. It is obviously non-aggressive. And you say it’s a non-issue. And you won’t miss a single day of work due to your treatment, which starts in, what, July?
BUFFET: Yes. Um-hmm.
CLAMAN: You won’t miss any work at all?
BUFFET: No. No. No. Maybe — maybe 15 minutes a day, something like that.
CLAMAN: We can lose you for 15 minutes.
BUFFET: Well, I wish — I wish that we couldn’t, but the truth is you can’t.
CLAMAN: But when you look at the — the person who will eventually take over, have you begun to apprentice your successor?
BUFFET: My — my successor doesn’t need apprenticing. If they needed apprenticing, they wouldn’t be the successor (INAUDIBLE) –
CLAMAN: They wouldn’t be the one?
BUFFET: No. In fact, none of the three candidates would need apprenticing.
CLAMAN: In some of what you talked about, you talked about how great some businesses are, but you talked about a big mistake. Energy future –
CLAMAN: — from a Texas utility company.
BUFFET: All mine do.
CLAMAN: So sorry to bring it up.
The Remaining Part: