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How tremendously fun it must be to be Warren Buffett, the acclaimed American investor, billionaire and philanthropist. The 'Oracle of Omaha' has spent his entire life doing what he loves, while he amassed a personal fortune of $131.7 billion.
Buffett will turn 94 on August 30, but he is remarkably cheerful for his age. However, the death of his right-hand man, Charlie Munger, at age 99 in November 2023, must have shaken Warren.
A lifetime of going a long time
'Uncle Warren' began investing at age 11 in 1942, investing his savings in three shares of a long-defunct American company. And 82 years later, he has lost none of his sparkling enthusiasm for capitalism.
Today, Warren Buffett is chairman and CEO of Berkshire Hathaway, which he and Munger turned into an $861 billion conglomerate. (Disclosure: My wife and I own shares of Berkshire B.) Buffett has also donated more than $50 billion to good causes and intends to donate 99% of all his wealth during his lifetime or upon death.
Therefore, 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 hugely profitable that it has a record cash reserve of $168 billion. Buffett has admitted that since big deals are few and far between in the US stock market, he finds it difficult to put that money to work.
Of course, no one except Buffett himself knows what he's thinking about Berkshire's cash. But by reading his wisdom I have learned that, ideally, you like his.”the holding period will be forever“and he likes it”buy wonderful businesses at fair prices“.
For several years I have argued that the United Kingdom FTSE 100 The index was too low and many of its stocks were undervalued. So 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 largest investor would be this: why not bid to buy the global beverage giant? Diageo (LSE:DGE)? (Another revelation: my wife and I also own Diageo shares.)
Buffett wants acquisitions that “move the needle,” generating strong profits and cash flow for Berkshire and its shareholders. Diageo certainly meets those requirements. At the current share price of 2,723p, this company is valued at £60.4bn, ranking it 9th on the Footsie by market value.
Diageo shares have weakened in recent years, falling 25% in the last 12 months and losing 15.1% of their value over five years. What's more, they are 26.3% below their 52-week high of 3,694.5 pence, set on May 5, 2023, and only 1.8% above their low of 2,676 pence, reached on January 23. (Excluding cash dividends).
Sure, Diageo has some short-term problems, particularly declining sales in the Caribbean and Latin America. Additionally, those under 25 drink less than their older cohorts, partly driven by the legalization of cannabis in several states and countries.
That said, if I had over £60 billion on hand, I would love to own this century-old business. Perhaps Warren Buffett, another value investor, could one day come to the same conclusion? I won't hold my breath though!
