Buffett and Claman Talk Stocks on FBN

Warren Buffett’s hour long interview on the FOX Business Network is probably the biggest thing to hit financial media this week, and the candor from the Oracle of Omaha was overwhelming. He shot down rumors and dismissed off-base speculation that has been swirling about his recent sales in the stock of PetroChina.

Often, when people are buried in a bad position, they start the Buffett rumors hoping to sell into a spike. The rumor that he was buying a stake in Hovnanian Enterprises in July was off the mark, and it would appear Lou Simpson of GEICO sat it out as well. Fact is, the homebuilding stocks are still too rich for Warren:

“I didn’t buy a share.  I look at them.  I look at their debt, their equities.  I look at everything.  I’m waiting until they’re under priced.  That’s what I look for with any security.  And, I don’t think they’re undervalued. Starting 30 minutes, ending 18 months ago – that year – we probably had more home builders offer to Berkshire where the managements wanted to see the business that I’ve ever seen in any industry.  A significant percentage of the publicly-owned home builders, when their stock was flying high and their management was talking bullishly, were trying to sell their companies.  Apparently they knew what was going on or likely to go on.  Though, I don’t think they saw it coming as extensively as it did.” Fox Business

Buffett recently made a major score in the stock of PetroChina, but his sales were interpreted by some as a concession to activists who criticized Buffett for investing in the company, given its business activities in the Sudan. Activists say the Chinese investments are helping the Sudanese resist international pressure over Darfur.

But Buffett dismissed those theories, claiming he only sold based on valuation and is even kicking himself for getting out a little too soon:

“We sold it [all stakes], but we sold it based on price [not politics].  At the time of the annual meeting it was around $100 and since then it has more than doubled so, unfortunately, I sold it a little too soon.  It was a decision based 100% on valuation.”

“If it went down a lot I’d buy it back.” “We made about $3.5bn on a $500m investment but we still sold it too soon.  I left a lot of money on the table.”

The methodology he employed is the decision making process might be a lesson to all investors, no matter how experienced they are:

“I sit there in my office and read an annual report, which fortunately, was in English, and it described a very good company. It told about the oil reserves, the refineries and everything else and I sat there and read it and said to myself this company’s worth about $100bn.  I don’t look at the price first.  I look at the business first and try to figure out what it’s worth because if I look at the price first I’ll get influenced by that.”

Warren is not a thematic investor, and takes ‘em one at a time. Is he chasing Chinese stocks?

“The answer is pretty much no.  I don’t look based on companies or that sort of thing.  I just read every report I can and figure out whether something is cheap.”

Buffett was rumored to be taking a stake in Countrywide Financial, but passed after speaking to embattled CEO Angelo Mozilo:

“Well, I talked to Angelo Mozilo, CEO, a few times and I never came close to buying the stock.  If there had been a comprehensive plan that might have involved us in some way owning some security I would have listened to the idea.  But, Bank of America came along and bought a $2bn convertible preferred as you know so we didn’t get close to doing anything.”

“Angelo was one of the first ones to say, with respect to what was happening in the mortgage market, he said I’ve never seen a soft landing and this is when we were talking about a soft landing.  So, he put out a few warning signals and maybe his sales, themselves, were warning signals.  In the end, I think he finally saw what was coming but he did describe it fairly well publicly a few times.”

Liz Claman got Buffett to fess up that he put $200 million to work in four stocks yesterday. We are not sure how he picked them, but you can make a few guesses how he found them.

“Some guys read Playboy.  I read annual reports.”

Chances are, Rick’s Cabaret International (RICK-NASDAQ) was probably not one of the four.

Buffett Tells FOX Business He’s Sold PetroChina Stake
FBN

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The content contained represent the opinions of1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position in securities mentioned

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