AUDIENCE MEMBER 00:09
Yes, my name is Steve Jack (PH). I’m from Southern California. And my question has to deal with kind of quality versus price.
I’ve been to three annual meetings and I’ve heard great things about Coke every year. But as far as I’m aware, you have not bought any additional shares of Coke over the last three years even though the stock has done just fine.
If an investor has a relatively short timeframe, say three to five years, how much weight do you think one should give to quality versus price?
WARREN BUFFETT 00:37
Well, if your timeframe is three to five years, A) I wouldn’t advise it being that way. Because I think if you think you’re going to get out then, it gets more toward — leaning toward the bigger fool theory.
The best way to look at any investment is, how will I feel if I own it forever, you know, and put all my family’s net worth in it?
But we basically believe in buying — if you talk about quality meaning the certainty that the business will perform as you expect it to perform over a period of time, so the range of possible performance is fairly narrow — you know, that’s the kind of business we like to buy.
And all I can say is that we like to pay a comfortable price, and that depends to some extent on what interest rates are.
We haven’t found comfortable prices for the kind of businesses we like in the last year. We don’t find them uncomfortable, in the sense that we want to sell them. But they’re not prices at which we — we added to Coke one time about, I don’t know, five years ago or thereabouts, and it’s conceivable we would add again. It’s a lot more conceivable we would add than subtract.
But that’s the way we feel about most of the businesses. We did make a decision last year that we thought bonds were relatively attractive, and we trimmed certain holdings and eliminated certain small holdings in order to make a bigger commitment in bonds. Charlie?
CHARLIE MUNGER 02:00
Yeah. You talk about quality versus price. The investment game always involves considering both quality and price. And the trick is to get more quality than you’re paying for in the price. It’s just that simple.
WARREN BUFFETT 02:19
But not easy.
CHARLIE MUNGER 02:20
No, but not easy.
WARREN BUFFETT 02:22
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