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Buffett, a cheerleader for America, takes his checkbook abroad

Published 27/02/2015, 06:15
© Reuters. Berkshire Hathaway chairman Buffett gestures at the start of a 5km race sponsored by Brooks Sports Inc. in Omaha
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By Luciana Lopez and Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett, in his annual letter to Berkshire Hathaway Inc shareholders last year, called America "the mother lode of opportunity."

This year, his 50th at Berkshire's helm, the world's third-richest person could write something quite different.

When Buffett releases this year's letter on Saturday, he may point to opportunities outside of the United States, after he recently decided to buy a German motorcycle accessories retailer and said he may shop more in that country.

That would mark a significant turn for Berkshire, a conglomerate with more than 80 businesses, giant stock investments and a $360 billion market value.

Buffett did not return a request for comment.

In his letter, eagerly awaited on Wall Street for Buffett's candid thoughts on investing, business and life, the 84-year-old Buffett may detail his vision for Berkshire in the decades to come, including after he is gone.

His comparatively taciturn second-in-command, 91-year-old Charlie Munger, is also expected to express his thoughts.

"Warren Buffett recognizes that global investing is going to be an important part of the future," said Michael Yoshikami, chief executive of Destination Wealth Management in Walnut Creek, California and a longtime Berkshire shareholder.

Buffett's strategy of buying solid companies at low prices has gotten more difficult in the United States. In the first quarter of 2009, when the S&P 500 index was barely one-third of what it is now, stocks on average cost 12.9 times projected full-year earnings.

At the end of 2014, that multiple had reached 17.4, above the long-term average of 14.8 times earnings, meaning it costs more to get the same financial pop.

By contrast, the rest of the world's growth has been sluggish. Germany is expected to grow just 1.3 percent this year, while the U.S. economy may expand 3.6 percent, according to the International Monetary Fund.

Though Buffett said this week the falling euro was not his primary driver for buying in Europe, it was a factor. The currency has slid about 20 percent against the U.S. dollar since May.

DOLLARS FOR DOUGHNUTS

In the last year, Berkshire has announced several purchases worth or estimated at a couple of billion dollars each.

These have included Procter & Gamble Co's Duracell battery unit, the Van Tuyl auto retailer, and SNC-Lavalin Group Inc's AltaLink energy transmission unit in Canada.

Buffett also kicked in $3 billion toward Burger King's purchase of Canadian doughnut chain Tim Hortons, which created Restaurant Brands International Inc.

Burger King is run by Brazil's 3G Capital, which shares ownership with Berkshire of ketchup maker HJ Heinz Co.

Berkshire ended September with $62 billion in cash, well above the $20 billion cash cushion Buffett likes. That leaves more than $40 billion to go shopping.

That means Buffett needs big purchases, which he calls "elephants," to soak up significant amounts of money. He has said he would team up again with a partner such as 3G Capital.

"There may be opportunities overseas that he would certainly consider," said Cathy Seifert, an analyst with S&P Capital IQ.

But even if Berkshire spreads its wings geographically, Seifert said, it will not turn its back on a good U.S. purchase.

© Reuters. Berkshire Hathaway chairman Buffett gestures at the start of a 5km race sponsored by Brooks Sports Inc. in Omaha

"I definitely would not rule out the U.S.," she said.

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