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On eve of Lyft's much-hyped debut, Warren Buffett says regular investors shouldn't buy hot IPOs

Key Points
  • The ride-hailing company Lyft is expected to debut Friday at a valuation of more than $20 billion.
  • The last time Buffett invested in an IPO was in Ford Motor company's debut in 1955.
  • Buffett acknowledged that his world view on the subject means he risks losing out on getting a piece of successful companies like Amazon and Uber when they're young.
Warren Buffett, Chairman and CEO of Berkshire Hathaway.
David A. Grogan | CNBC

On the eve of Lyft's much-anticipated initial public offering, billionaire investor Warren Buffett said regular investors shouldn't attempt to buy hot offerings in a hot market.

While he was speaking generally of IPOs and not specifically about Lyft, the comments by Berkshire Hathaway's chairman and CEO come amid a big wave of announced and anticipated IPOs as Silicon Valley's "unicorns" rush to market. Unicorn is the tech industry's term for a private company that has achieved a valuation above $1 billion even before selling stock to the public.

The high level of interest in Lyft's offering has raised its anticipated price, putting a valuation on the ride-hailing company at well over $20 billion even though it is not yet profitable.

Buffett said the last time he bought an IPO was in the 1950s, the debut of Ford Motor.

"I think buying new offerings during hot periods in the market ... I don't think it's anything the average person should think about at all," Buffett told CNBC's Becky Quick at The Gatehouse's Hands Up for Success luncheon in Grapevine, Texas.

Buffett acknowledged that his world view on the subject means he risks losing out on getting a piece of successful companies when they're young, like early Amazon or Uber.

Last year, he told CNBC he had considered taking a private stake in Uber, Lyft's ride-hailing rival, which is also expected to debut this year. But Uber and Berkshire disagreed over the terms and size of the stake. Buffett still told CNBC's Quick then that he was a big admirer of Uber CEO Dara Khosrowshahi.

But, Buffett said Thursday that it's better to be safe than sorry when investing in untested companies. "You can go around making dumb bets and win. ... It's not something you want to take as a lifetime policy, though."

A glut of IPOs this year comes after the deal market dried up during last year's stock market tumble. Companies that put off their debuts back then are rushing out the door now before it closes again.

The markets have been jittery over falling interest rates, and what they may signal about the state of the economy. Buffett said Thursday that it did appear the economy had slowed down a bit. But, he said, low rates are good for stocks because they naturally draw investors to the stock market for better returns.