What enormous fun it must be to be Warren Buffett, the acclaimed American investor, billionaire, and philanthropist. The ‘Oracle of Omaha’ has spent his whole life doing what he loves, while amassing a $131.7bn personal fortune.
Buffett turns 94 on 30 August, but is remarkably spry for his age. However, his right-hand man Charlie Munger’s death at age 99 in November 2023 must have shaken Warren.
A lifetime of going long
‘Uncle Warren’ started investing aged 11 in 1942, investing his savings into three shares of a long-gone US business. And 82 years on, he has lost none of his sparkling enthusiasm for capitalism.
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Today, Warren Buffett is chairman and CEO of Berkshire Hathaway, which he and Munger grew into an $861bn conglomerate. (Disclosure: my wife and I own Berkshire B stock.) Buffett has also donated over $50bn to good causes and intends to donate 99% of his entire wealth during his lifetime or on death.
Hence, Buffett is one of my personal heroes, along with physicists Richard Feynman and Stephen Hawking, mathematicians Johann Carl Friedrich Gauss and Srinivasa Ramanujan, and computer scientist Alan Turing.
Buffett has a problem
Right now, Warren has a big — but welcome — problem. Berkshire Hathaway is so massively profitable, it sits on a record cash pile of $168bn. Buffett has admitted that with big bargains few and far between in the US stock market, he struggles to put this cash to work.
Of course, no-one but Buffett himself knows what he’s thinking regarding Berkshire’s cash pile. But I’ve learnt from reading his wisdom that, ideally, he likes his “holding period to be forever” and he likes to “buy wonderful businesses at fair prices“.
For several years, I’ve argued that the UK’s FTSE 100 index was much too low and that too many of its constituent shares were undervalued. Thus, my advice to Warren Buffett is simple: why not buy big outside of your homeland?
What could Warren buy?
Therefore, my suggestion to the world’s greatest investor would be this: why not bid to buy global drinks giant Diageo (LSE: DGE)? (Another disclosure: my wife and I also own Diageo shares.)
Buffett wants acquisitions that ‘move the needle’, delivering strong earnings and cash flow to Berkshire and its shareholders. Diageo certainly fits that bill. At the current share price of 2,723p, this firm is valued at £60.4bn, making it #9 in the Footsie by market value.
Diageo’s shares have weakened in recent years, falling 25% in the past 12 months and losing 15.1% of their value over five years. What’s more, they stand 26.3% below their 52-week high of 3,694.5p, set on 5 May 2023, and just 1.8% above their low of 2,676p, hit on 23 January. (Excluding cash dividends).
Sure, Diageo has a few short-term problems, notably shrinking sales in the Caribbean and Latin America. Also, the under-25s are drinking less than their older cohorts, partly driven by the legalisation of cannabis in various states and countries.
That said, if I had well over £60bn at hand, I’d love to own this centuries-old business outright. Perhaps Warren Buffett — a fellow value investor — might one day reach this same conclusion? However, I won’t hold my breath!
