Warren Buffett on Value Investing, Repackaging Toads, Google and Investing in North Korea
CNBC's Becky Quick traveled exclusively with Warren Buffett on a whirlwind tour of China and South Korea. All this morning on Squawk Box, she reported in-depth on the trip and what it tells us about Buffett's investment philosophy.
In this report, Becky shows us the highlights from Buffett's news conferences during his Asian trip. Among the topics: the benefits of value investing, repackaging toads in hopes of turning them into princes, Google's prospects, and the possibility of investing in North Korea.
Becky: From the time he stepped off the plane in China, the cameras were rolling. Reporters from across Asia, recording his every move on the ground. And everywhere, everyone wanted to hear what Warren Buffett had to say, especially about the markets.
Warren: Markets tend to overshoot in both directions and initially people get excited in markets and they advance because things are getting better and earnings are developing....
My reaction is always to get more cautious because it's easy to get carried away in the stock market when things have been going very well. So, you should buy stocks because you think the businesses are worth more than you are paying ...
I don't try to predict stock markets. I try to find securities - stocks - that are selling for less than I feel that they're worth and buy them.
Becky: Just about every word he said in the interviews seemed to hit the wires. In fact, even things he didn't say hit the wires. Let's just say some things got lost in translation.
But Buffett doled out plenty of his characteristic advice on value investing.
Buffett: I am always looking for things I can understand and if you understand the businesses and you buy at attractive prices, there really isn't much risk.
Becky: And he made some news, too, criticizing the plan by Citi and other big banks to create a super SIV fund.
Warren: One of the lessons that investors seem to have to learn over and over again, and they will have to learn it again in the future, is that not only can you not turn a toad into a prince by kissing it, but you also can't turn a toad into a prince by repackaging it.
Becky: He also weighed in on high-flying Google.
Warren: It's not hard to see that Google is a phenomenal company, but Google is valued at about $200 billion in the market now, so to make 14 percent a year, Google has to be valued at $400 billion in five years. It may very well be. It may be valued at 5 or 600 billion, but I am not smart enough to figure that out.
Becky: And while he didn't say which markets or stocks he favors the most, he did mention one place he doesn't favor at all.
Warren: I would say things would have to change a whole lot before we would be investing in North Korea. I'm flattered that you asked that question, because I am 77 years old and the fact that the day might come in my lifetime when North Korea offers an investment opportunity is kinda flattering.
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