Buffett Says, Why Buy Shares When You Can Acquire the Whole Firm?

Berkshire Hathaway Inc. wants to buy entire companies rather than invest in publicly traded shares, billionaire Chairman Warren Buffett said at the company’s annual meeting over the weekend.

“We would like to buy businesses,” Buffett told a packed crowd of investors at the Omaha Civic Center. “We do not think equities are going to be very exciting for the next 10 years.”

Berkshire, which owns insurance companies such as Geico Insurance Co. and General Reinsurance Co., could become 90% invested directly in businesses and only 10% through ownership of publicly traded companies, he said. “We may not own that many securities over time,” Buffett said, without giving the percentage the company now has invested in stocks.

Berkshire directly owns more than 40 companies ranging from Borsheim’s, a jewelry retailer in Omaha, to See’s Candies. The opportunities to buy closely held companies are better than prospects for finding bargains in U.S. stocks, Buffett said.

“We would love to find businesses selling for half of what they’re worth, but there’s so much money sloshing around you can’t,” Buffett said. “We find valuations in the high side that are unbelievable.”

Buffett, who shuns technology shares, marveled that Internet companies that couldn’t borrow $100 million as private companies have market caps of more than $10 billion through initial public offerings.

“The ability to monetize shareholder ignorance has probably never been exceeded,” Buffett said. “It’s as extreme as anything that happened in the 1920s. It’s precautionary to us.”

Charles Munger, Berkshire’s vice chairman who is renown as Buffett’s taciturn sidekick, was animated during the six-hour question-and-answer period.

“It’s hard to think of a time when stocks and real estate grew so rapidly,” Munger said. “It’s as extreme as its been in modern capitalism. There’s so much easy money around, it’s a very unusual period.”

Buffett declined to speak much about stocks Berkshire is selling while share prices are inflated. Berkshire’s annual report said it owned 51.2 million Walt Disney Co. shares as of Dec. 31, down from 64.5 million shares a year ago, taking into account a 3-for-1 stock split in July.

“We think Disney is a terrific business,” Buffett said. “We have mildly reduced equity as prices generally got more and more full.”

Buffett said he remained committed to Berkshire’s 8% stake in Coca-Cola Co. and 9% stake in Gillette Co., even though poor performance from the companies last year helped drag Berkshire shares lower.

“The capital allocation job I did in 1999 was very, very poor,” Buffett said. “Coca-Cola Co. and Gillette Co. had bad years last year. They’ll have good years.”

Omaha-based Berkshire’s own shares fell 20% in 1999, the worst performance in its 35-year history.

Meanwhile, Buffett, rising to the defense of friend Bill Gates, criticized the Justice Department’s antitrust case against Microsoft Corp.

Twenty years ago, America feared losing its economic dominance to Germany and Japan, Buffett said, but then swept competitors aside with high-technology companies such as Microsoft.

“I wouldn’t want to take a meat ax to something that is pulling us along in a very important way,” Buffett said.