On May 6, 2013, Fox Business anchor Liz Claman conducted a live, 1-hour interview with famed investor Warren Buffett, Chairman and CEO of Berkshire Hathaway, along with Berkshire board member and Microsoft founder Bill Gates and Vice Chair Charlie Munger.
Liz Claman joined FOX Business Network (FBN) as an anchor in October 2007. She hosts “Countdown to the Closing Bell” (3 PM/ET) in addition to co-anchoring “After the Bell” (4 PM/ET) with David Asman. While at FBN, Claman has conducted exclusive interviews with Intel CEO Paul Otellini, Ford CEO Alan Mulally, Google Executive Chairman Eric Schmidt, and United States Treasury Secretary Timothy Geithner. Claman’s debut on FBN was marked by an exclusive interview with Buffett (who, by the way, just joined Twitter a few days ago and already has nearly 380,000 followers at the time of this writing).
Liz has learned a lot about business and investing from her many conversations with Buffett, and wanted to share some of the Oracle of Omaha’s wisdom with the readers of AllBusiness.com.
AllBusiness: What’s the best advice Warren Buffett has given you about how to buy a business? What factors go into his decision when he’s considering a small business?
Liz Claman: Warren Buffett loves to invest in brilliant businesses. Big, small . . . he’ll take them all if they’re run brilliantly (think: Ken Chenault at American Express), have products that just can’t be beat by the competition (think: Coca Cola) and generate a bunch of cash (think: DirecTV). But when it comes to outright purchasing businesses, he really doesn’t care about size. He just bought multi-billion dollar Heinz this year, but owns much tinier businesses like The Pampered Chef and Oriental Trading Company.
When it comes to the best advice I’ve ever received about not necessarily how but why to buy a business, it’s almost a tie between cash generation and superstar management.
Management. Buffett never buys a company where he’ll have to fire the management right off the bat. He has no interest in running these companies. He wants to buy them because the managers, as he calls them, have done such a good job at that job that they want to stay and continue to run it. He never buys a company where the management wants to take the money and run. That’s a bad sign.
The Best-in-Class Product. Think Wrigley's chewing gum, Mars candy bars, Heinz ketchup. Given the choice, Buffett bets you’ll reach for those names over their competitors. That’s why he bought a very small California candy company called See's decades ago. They were best in class for the price and he just sensed they’d be a huge cash generator. To this day, Buffett tells me that small business generated much of the cash he later used to buy bigger businesses.
Moat of Competitiveness. Some of his smaller businesses are winners in their niche sectors. They’re so good at what they do, they have, as he calls it, a “moat” of competitiveness. Justin Brand cowboy boots are known among cowboy boot aficionados as the boot to be seen in among the cowboy set. Brooks running shoes are first pick some of the world’s top runners. Not a huge business but a massive cash generator. Classic Buffett buy.
Buffett owns more than 70 businesses under the Berkshire umbrella. He’s spent more than 45 years plucking them like rare flowers, but he keeps them alive by leaving the same gardeners who tended them in the first place right there at the very top. He is arguably the most successful investor of our time and that’s why business schools around the world study him, obsess over his tactics and teach his principles.
Watch outtakes from Liz Claman's interview with Warren Buffett on FOX Business
Berkshire Hathaway Shares Trading at All-Time High
Berkshire Hathaway CEO Warren Buffett on the growth of his company and success of the shareholders weekend.
Buffett: Not Our Nation's Worst Hour
Berkshire Hathaway CEO Warren Buffett on the current state of politics in the U.S.
Buffett: Market Will Continue to Move Higher
Berkshire Hathaway CEO Warren Buffett answers questions from MBA students around the country.
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