2007: Will Berkshire invest materially overseas?

AUDIENCE MEMBER: Greetings to all of you from the Midwest of Europe from the city of Bonn in Germany.

My name is Norman Rentrop. I’m a shareholder in Berkshire since 1992, as well as a shareholder in Wesco and Cologne Re.

I’m a great admirer of both of you and want to thank you again for sharing your wisdom with us and for continuing to stay humble by managing Berkshire for the benefit of all of us without any big 2 and 20 percent fees, without stock option plans. (Applause)

WARREN BUFFETT: Be careful. You’re giving Charlie ideas here. (Laughter)

AUDIENCE MEMBER: And I want to applaud you in setting another great example by donating most of your wealth to charity and for donating — (applause) — and for donating it in a very intelligent and selfless — that it’s not your name on the foundation — way.

Now, I’m a little disturbed by the remarks from another great investor, from John Templeton, who continues to say that you are narrow-sighted in not investing more overseas.

You do focus on the U.S. with relatively little, so far, internationally. You explained that it doesn’t really matter whether a company is headquartered in the U.S. or London or Munich or Paris, and that you would pay almost as high an amount for such companies as for similar U.S. companies.

You were audacious to invest your petty cash in South Korean stocks.

Coca-Cola went totally global many years ago; whereas, Hershey’s missed the opportunity to go global, leaving the chocolate globalization to Swiss-based Lindt & Sprungli.

Now, what would it take you to go totally global with Berkshire by investing internationally in a big way?

WARREN BUFFETT: Well, that’s a very good question. And I would say that I know I probably bought my first stock outside the United States at least 50 years ago.

It is not that we have not looked in the marketable securities field beyond this country, and we’ve made some investments there.

It really wouldn’t make any difference to us if Coca-Cola was based in Amsterdam or Munich or Atlanta as long as they had the business they had.

So we’re very involved in international business, but the hard fact is that in terms of buying entire businesses, we were simply not on the radar screen to the same extent — close to the same extend —outside the United States as we became in the United States.

When we started in the United States, really, nobody knew anything about Berkshire, either, so we had — we had a selling job to do here, but we did not do the selling job — or I did not do the selling job — well abroad.

And thanks to Eitan Wertheimer, he found us. And I think has contributed in a very significant way to getting us better known.

We have no bias against buying either marketable securities or entire businesses outside the United States.

Eitan is even planning a little procedure to get us even better known — get Berkshire even better known — outside the United States, and I’m going to participate in that with him within the next six or eight months.

But we can be very validly criticized for not being a better effort to get on that radar screen.

I think we’re — I think it’s improving. We own a number of non-U.S. securities. We own stock in — just stock, marketable securities — we own two that are based in Germany, and we own others — as it’s been pointed out — we own, for example, 4 percent of POSCO, which is based in South Korea. That’s over a billion-dollar investment at current market.

And we have — I can think of a half a dozen or so marketable securities investments outside the United States.

We don’t have to report those in the 13F — I believe I’m right on this, [CFO] Marc [Hamburg] — so they don’t necessarily get picked up the same way as do our domestic investments by reports we make to the SEC.

There’s a problem — for example, in Germany we have to report our holdings in Germany if our holdings exceed 3 percent.

Well, if you’re talking about a company with 10 billion in market value, that means at $300 million we have to tell the world what we’re buying, and telling the world what we’re buying is not the favorite activity of Charlie and myself.

So — and it tends to screw up future buying. So that 3 percent threshold, which exists in the UK, exists in Germany, is a real minus to us, in terms of accumulating shares.

But I can assure you that the entire world is definitely on our radar screen, and we hope to be on its.

Charlie?

CHARLIE MUNGER: Well yes. I’d say that John Templeton made a fortune going into Japan very early and having the Japanese stocks go up to 30 or 40 times earnings.

And that was a very admirable piece of investment. But, you know, we did all right in the same period. (Applause)