market folly

Berkshire Hathway's Warren Buffett sat down for an interview with CNBC's Becky Quick.  Earlier today we posted up Warren Buffett's 2016 annual letter which was just released.

Here's the takeaways from the interview:

- Between right before the election and now, he's bought $20 billion worth of stocks.  Wasn't driven by the election results or anything like that, all just individual equity analysis.  Thinks stocks are cheap given interest rates being where they are.  Would much rather have money be in stocks rather than Treasury bills.

- Has more than doubled his Apple (AAPL) stake in 2017.  Berkshire originally held a smaller position in AAPL (most likely from Ted Weschler and Todd Combs, his portfolio managers).  In the fourth quarter of 2016, Buffett ramped up buying Apple and established over a $6 billion position.  Now he says he doubled his AAPL stake in January.  He bought 120 million AAPL shares after previously owning 57 million shares at the end of 2016.  He now owns $17 billion worth of AAPL, but hasn't bought any shares since the most recent earnings report.  One of Todd/Ted owns an additional 10 million shares, so Berkshire's total exposure is now 130 million AAPL shares.

- Why did Buffett buy Apple?  "Because I liked it."  He also added that he likes CEO Tim Cook's ability to retain consumers and his capital deployment.  "Apple strikes me as having a sticky product, and an enormously useful product to people that use it."  Buffett himself doesn't own an iPhone.  "The continuity of the product is huge and the degree to which their lives center around (the iPhone) is huge."

- Commented he thinks Amazon.com's (AMZN) Jeff Bezos is the best manager out there.  Buffett doesn't own AMZN and admits it was probably a mistake, but he didn't buy because retail is a tricky business to figure out.  Buffett "doesn't have a good answer" for not investing in it.  He didn't understand the power of the model.

- "It absolutely baffles me who buys a 30-year bond."  Getting 3% for 30 years doesn't make sense to him.

- Thinks the typical hedge fund "2 and 20" fee model "is just ridiculous."  Says the fees make people rich, but won't make the investors rich.

- "Self driving cars will be adopted if they're safer. If they're safer, there's less in the way of insurance costs; that brings down premium volume significantly."  Says it will hurt GEICO's business significantly if it happens.  "If I had to take the over/under on whether in 10 years 10% of the cars would be self-driving, I'd take the under."  Lots of brains and billions of dollars being spent here, so it could come sooner than he thinks.  But admits it'll be negative for auto insurers.


Video 1 on Buying Stocks & Apple


Video 2 on Why Apple


Video 3 on Amazon


Video 4 on Treasuries


Video 5 on Hedge Fund "2 and 20" fee system


Video 6 on Self Driving Cars & Insurance


Video 7 on American Dynamism


For more from the Oracle of Omaha, check out Warren Buffett's 2016 annual letter which was just released.