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Welcome everyone again. This is a special edition of Squawkbox. We're live from Omaha with Warren Buffett, who took the time to sit down with us today and answer not only our questions, but also the ones you sent in. And, Warren, we appreciate it. We received a lot of questions. Carl mentioned that perhaps the most intriguing line in your letter was the idea that your “elephant gun” is loaded and you are ready .
Uh, my finger itches to press the hook. This is what prompted many of the questions that came in. So would you mind if we quickly run through some of these questions in a blitz poll format? Take action. Good. The first question, let’s say, comes from Michael from Canada, who writes: “Since the articles mention that you’re looking for big purchases and the economy is favoring the budget segment, would n’t Family Dollar be a perfect fit?
» Well, there are many companies that would be suitable for a certain price. It's easier for us to buy private companies than publicly traded ones because...people...I don't care about the market price in terms of their value to us, but generally people when evaluating mergers and acquisitions look at the premium to the market price and decide if it's fair.
A fair price for us is the one at which we believe we will receive a return on our investment in the form of future income. And I would say that we usually have better luck with private companies than with public ones. Even though Burlington was a public company...most companies, most good companies, are sold at prices where, if we had to pay a 20 percent premium to the market, I wouldn't want to buy them.
I mean, if you look at 50 large companies that could fit into the "elephant" category. If you add 20% to this price, I wouldn't want to pay that much for such a business. There are a few exceptions, but not very many. OK. Well, let's talk about a private company. Earlier this week we had Whitney Tilson on the air .
He said he didn't know anything, but it seemed to him that Mars could be an interesting company. Well, Mars is a great business, and we are their Wrigley partner. And if the Mars family asked me about selling their business, MGM. I would say: keep it to yourself. I mean, if you have a great business in your life, the best thing you can do is keep it.
You're just trading your great business for a pile of cash that's not as valuable as the business itself, and now you have the problem of where to invest it, and you probably have to pay taxes. So my advice to anyone who has a great business is: keep it . Of course, sometimes, for tax reasons , family circumstances, or something else, a great business has to be put up for sale.
But I told a lot of people who came to me with their wonderful businesses. If you can find a way to keep it, keep it, because all you're doing is taking your billion or five billion and paying taxes on it. After that, you go buy stocks, most of which aren't as great as your business, and you know much less about them.
So sometimes it's worth understanding when you're already doing well. So why would anyone sell their business to you in the first place? Well, they sell because families are growing, branching out, or whatever you want to call it. And sometimes people just lose interest in the matter. We bought See's Candy, one of our first purchases, back in 1972.
Mary C. had several grandchildren, one of whom really wanted to run the business, the other less so. The one who was interested died, and the other, less interested, decided to sell the shares. There are human factors at play here, but you should never sell a good business just for money; This doesn't make sense.
Okay, let's take a few more questions from the audience. This is question number 96, again from Paul from Thailand, who wants to know about " unloading an elephant gun." Do you plan to discharge it in the United States or abroad? Wherever it is, I can't afford to go overboard. There are so few opportunities that, you know, four or five years ago I was very lucky because I received a letter from Israel about ISCAR.
I had never heard of this company before, but I immediately realized that this was our type of business and our type of management. I would like to receive another letter like this tomorrow. And I don't care if he comes from Great Britain, Germany, France, or anywhere else. It is more likely to be the United States than any other place.
But we definitely haven't acquired our last international company yet. Well, another letter, Sergio from Mexico. He wants to know if there is any reason not to use the " elephant gun" in the stock market? For example, increase Wells Fargo's stake to the 10% limit or buy much more Walmart? Yes. Well, over the past year we have done both of those things.
We bought some more Walmart, some more Wells Fargo, and I like those companies, I like the prices they're selling at, and I like their management, but if I had a choice, I would rather buy a large business that meets all of our criteria. But we have over 60 billion in common stock. And these are the parts of businesses that I like.
And most of these companies, like Wells Fargo, we wouldn't be able to buy outright. We can't buy a bank. You know, Coca-Cola is not going to sell itself to us. Walmart is not going to sell to us. So we would be very happy to own 100% of these companies at the prices they are selling at, otherwise I would n't buy their stock.
OK. Roman from Pittsburgh writes in and I think I know the answer to this question, but he wants to know if you would be interested in purchasing more American railroads at the right price. You can't do this. That would be quite difficult. Yes. And actually, when we bought BNSF, the law didn't require it, but we thought it appropriate to sell our interests in Norfolk Southern and Union Pacific.
And it probably cost me at least a billion dollars. I liked those promotions. I mean, I knew these companies would be successful, and legally we shouldn't have done this. We thought it was a good idea, but now I think it was a bad idea. But that's not a reflection of your vision for the rest... Oh, no.
I think I would buy more of those railroads. Those railways have a common future. The great railroads in the United States have a shared future. Right now I like Western more than Eastern, but there are fundamental reasons why railroads will be successful. And no, if I could, at least at the prices of a year ago, I would gladly have bought shares of other railroads in addition to buying BNSF.
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