He may be stepping down from the board of Kraft Heinz, but rumours that magnate Warren Buffett is planning to excuse himself from the world of business are firmly untrue.
Kraft Heinz recently announced that Buffett will step down from its board in April, however, his firm, Berkshire Hathaway, will still have representatives on the ketchup-maker's board.
The 87-year-old steps away from one of his biggest business ventures, which was formed when Berkshire Hathaway teamed up with Brazilian investment firm 3G Capital to buy Heinz in 2013, before merging it with Kraft Foods in 2015.
Despite his age – part of the reason for stepping down from the Kraft Heinz board is due to a reduction in travel commitments –Buffett remains as sharp as ever when it comes to business acumen.
Shareholder Letter
On Saturday, Buffett published Berkshire Hathaway's annual shareholder letter – one of the most eagerly anticipated events in the investor calendar – indicating that the business is planning to make several significant investments after what he described as a recent 'drought of acquisitions'.
'Berkshire’s goal is to substantially increase the earnings of its non-insurance group,' Buffett wrote. 'For that to happen, we will need to make one or more huge acquisitions. We certainly have the resources to do so.'
Berkshire Hathaway has some $116 billion in cash to spend on acquisitions, he revealed, writing, 'This extraordinary liquidity earns only a pittance and is far beyond the level Charlie [Munger, vice-chairman of Berkshire Hathaway, aged 94] and I wish Berkshire to have. Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets.'
In the letter, Buffett outlined some of the key qualities that Berkshire Hathaway is looking for in a potential investment target, such as 'durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price'.
Optimistic Purchases
He also offered a critical commentary on some of the major acquisitions that took place in 2017, saying that 'prices for decent, but far from spectacular, businesses hit an all-time high'.
Indeed, he noted, 'price seemed almost irrelevant to an army of optimistic purchasers' and the 'able availability of extraordinarily cheap debt' helped fuel investments.
'Why the purchasing frenzy?' Buffett added. 'In part, it’s because the CEO job self-selects for “can-do” types. If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life.'
At the same time, he assured shareholders that both himself and Charlie 'sleep well', despite the group's 'dampened' returns in recent years.
'Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need,' he noted. 'We held this view 50 years ago, when we each ran an investment partnership, funded by a few friends and relatives who trusted us. We also hold it today after a million or so "partners" have joined us at Berkshire.'
It's all par for the course for the self-styled Sage of Omaha, even as he approaches his tenth decade. Never change, Warren.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
