In the annual shareholder letter, Buffett lamented the lack of big acquisition opportunities, which he called “elephants.” The last major acquisition for Berkshire Hathaway (BRK-B) was Precision Castparts in 2015. While Buffett has praised the company and the management, in hindsight it looks like Berkshire overpaid for the company, a fact echoed by Buffett. Furthermore, the acquisition came at the wrong time in the cycle, as aerospace component companies (GE) (ARNC) (BA) have seen turbulent times in the last four years.
Generally, Buffett starts with buying small stakes in companies that he eventually scales up as he gets comfortable with the company. Oracle (ORCL) was an exception, and Buffett exited the stock within a quarter of buying it. Given Berkshire’s portfolio of publicly traded securities (SPY), Travelers Company (TRV) could possibly on Buffett’s radar for an outright acquisition given the fact that Buffett is more than comfortable with insurance companies (XLF).
Having said that, Berkshire might also look at an overseas acquisition particularly in China (FXI) (TCEHY). In his annual letter, Buffett said, “At Berkshire, we hope to invest significant sums across borders.” In a lighter vein, Buffett said in last year’s shareholder meeting, “In August, I’m going to be 88, and that will be the eighth month of the year, and it’s a year that ends with an eight. And as you and I both know, eight is a very lucky number in China. So if you find anything over there for me, this is the time we should be acquiring something.”
Last year, Buffett invested in an Indian startup (EEM) that competes with the e-commerce ventures of Amazon (AMZN) and Walmart (WMT). Chinese stocks including Alibaba (BABA), Baidu (BIDU), JD.com (JD), and NIO (NIO) have been strong this year amid optimism about US-China trade relations.
Read Is Warren Buffett Expecting a Market Crash for more information.