Buffett, Munger stick to their disciplined ways despite record cash: 'We're very good at saying no'

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Warren Buffett (L) and Berkshire-Hathaway partner Charlie Munger

Eric Francis | Getty Images

Warren Buffett may have a giant cash pile to burn but that doesn’t necessarily mean he will compromise his long-standing value investing principles.

Over the past few months, the Oracle of Omaha has passed on different opportunities to acquire companies, big or small, as Berkshire Hathaway’s cash grew to a record of $128 billion. In November, Buffett backed out of a bidding war after a slightly higher offer to buy a hot technology distributor Tech Data.

On Thursday we learned he also declined to purchase luxury jeweler Tiffany when it was looking for a buyer last year.

The lofty market valuation could be holding back Buffett and his partner Charlie Munger, Berkshire’s vice chairman, who have long been drawn to cheap companies with long-term prospects. Buffett has repeatedly said the premium for buying companies outright has gotten too rich for his liking partly due to competition from private-equity companies and other players.

Stocks’ historic run in 2019 has also driven multiples higher across the board and lifted most stocks. Berkshire’s latest regulatory filing revealed the conglomerate only added one new stock during third quarter of 2019 — RH, formerly known as Restoration Hardware.

“In recent years, the sensible course for us to follow has been clear: Many stocks have offered far more for our money than we could obtain by purchasing businesses in their entirety,” Buffett wrote in his 2018 annual report. “The companies in which we invested offered excellent value, far exceeding that available in takeover transactions.”

‘We’re very good at saying no’

The billionaire duo commented on their tendency to reject invitations to top a takeover bid at Bershire’s annual meeting way back in 1999 and it appears they haven’t changed.

“We do get approached occasionally. I should say, we get approached when somebody, occasionally, when somebody has a takeover bid. And they say, ‘Would you like to top it or something?’ To which our answer, invariably, is no,” Buffett said then, according to CNBC’s Warren Buffett Archive, which houses videos and transcripts from 25 annual meetings going back to 1994.

Munger said, “Well, we’re very good at saying no.”

Buffett added, “Charlie’s better than I am, even.”

Today, Berkshire maintains large positions in value names including Bank of America, Coca-Cola, Wells Fargo, American Express and Kraft Heinz. Last year, Berkshire announced a $10 billion investment in Occidental Petroleum for the Anadarko takeover.