Billionaire Warren Buffett said Monday that his personal political views should not enter into the investment choices he makes for Berkshire Hathaway, the $500 billion conglomerate he leads.
His comments came during a wide-ranging, three-hour interview on CNBC, where he was asked whether Berkshire owned shares in gun manufacturers by CNBC Squawk Box co-anchor Becky Quick.
Several companies have severed ties with the National Rifle Association in the wake of the massacre earlier this month at Marjory Stoneman Douglas High School in Parkland, Fla., where 17 students and staff were killed by a former student. Surviving students and other activists have called for more rigorous gun laws following the shooting.
Buffett said Berkshire does not own shares of gun manufacturers and he applauded the student activists. But he said personal politics should not enter into the investing equation.
“I don’t think that Berkshire should say we’re not going to do business with people who own guns,” he said. “That would be ridiculous.”
Buffett’s statement follows recent comments by money manager Larry Fink, the chief executive of BlackRock, the $6.3 trillion asset manager. Fink in January sent a letter to chief executives of public companies telling them that society is demanding they be conscious of broader responsibilities beyond short-term returns to shareholders. “Society is demanding that companies, both public and private, serve a social purpose,” Fink wrote in his annual letter to CEOs.
Buffett cautioned “it’s a mistake to start getting personal views and trying to impose them on an organization.”
“You have to be pretty careful if you’re saying that you’re not going to fly on this airline because of that or we’re not going to use this railroad because of that,” he said.
The Berkshire chief said he and his top investing deputies are not guided in their Berkshire investments by personal views on politics or social issues.
“I have not issued any edict….that they can’t own stock in any gun manufacturers,” Buffett said, referring to his team of stock pickers. “They can own stock in gun manufacturers. They can own stock in liquor manufacturers. We do own stock in [liquor-maker] Diageo and have for a long time.”
Buffett in the past has defended people’s right to buy and consume most anything, including hamburgers, sweets and Coca-Cola products, all of which have come under fire for contributing to obesity. Berkshire’s properties include Dairy Queen, the soft serve ice cream and fast-food restaurant chain, and a large stake in Coca-Cola.
Buffett, whose fans call him the “Oracle of Omaha,” proudly touts his love for Coke, hamburgers and Dairy Queen.
Buffett’s Squawk Box interview followed the release over the weekend of his highly anticipated annual shareholder letter.
The 17-page letter touched on several issues, including a $29 billion cash windfall Berkshire shareholders will receive courtesy of the tax legislation signed by President Trump. It also acknowledged the $116 billion cash hoard that Berkshire has on hand, and the challenge of looking for an investment at the right price.
Despite his aversion to lowering taxes on the wealthy, Buffett called the tax reform a “huge tailwind” for American business and a boost in value for Berkshire in particular.
Buffett also said he prefers buying back Berkshire shares rather than paying a dividend.
“The inclination might be more toward repurchases than dividends because dividends have the implied promise that you keep paying them forever,” Buffett said.
Buffett said at last year’s shareholder meeting in Omaha that a Berkshire cash pile of $150 billion would be indefensible to shareholders.
Morningstar analyst Gregg Warren said he expects a one-time dividend in the next couple of years, despite Buffett’s preference for stock buybacks.
Warren said asset prices are high, Berkshire stock is above $300,000 per share and the cash is piling up at the rate of $20 billion in free cash flow a year.
“Absent any deals in the next two years, we are going to be at $150 billion,” he said. “As we are valuing the firm, we assume they are going to pay a one-time, big dividend, probably in 2019.”
For those shareholders who want a dividend, Buffett suggested they sell some of their stock.
“The people who want to turn a little bit of what Berkshire earns each year into the equivalent of a dividend, into cash, can do it,” he said. “They don’t force that policy on the other people.”
He said that over the 53-year-life of the conglomerate, it has essentially been a savings account for its investors.
“It’s a way of saving money over time,” the investor said. ”The money gets left in, and we invest it.”