1994: What does Buffett look for in a foreign investment?

AUDIENCE MEMBER: Mr. Buffett, Kathleen Ambrose (PH) from Omaha.

I have a question regarding global diversification. Just in general, what do you look for in a company and, if so, as far as Europe or Latin America, if you’d like to be specific?

WARREN BUFFETT: The question is about global diversification.

All we want to be in is businesses that we understand, run by people that we like, and priced attractively compared to the future prospects.

So, there is no specific desire to either be in the rest of Europe, or the rest of the world, or Far East, or to avoid it.

It’s simply a factor that — it’s not a big factor. There may be more chances for growth in some countries.

We — 80 percent of Coca-Cola’s earnings, roughly, will come from outside the United States. Eighty percent of Guinness’s earnings will come from outside the United States, but they’re domiciled outside the United States, whereas Coca-Cola is domiciled here.

Certainly, in many cases, there are markets outside the United States that have way better prospects for growth than the U.S. market would have, but they probably have some other risks to them that this market may not have.

But, we, you know, we like the international prospects, obviously, of a company like Coke. We like the international prospects of a company like Gillette. Gillette earned 70 percent of its money outside this country.

So, if you look — on a look-through basis — Coke — we might this year get something like $150 million of earnings, indirectly, for Berkshire’s interest from the rest of the world just through Coca-Cola alone.

But, we don’t make any specific — we don’t think in terms of, I like this region so I want to be there or something of a sort.

It’s something that’s specific to the companies we’re looking at, then we’ll try to evaluate that.

Coke is expanding in China. Well, it — you know — I think that — I forget what they showed last year, maybe 38 percent growth, or something like that, in cases. Maybe —

It’s nice to have markets like that that are relatively untapped.

Actually, Gillette is expanding in China in a big way and the Chinese don’t shave as often. And more of them are what they call “dry shavers” than “wet shavers” there, which is electric shavers.

But you know, maybe we could stick something in the Coke that would — (laughter)

Maybe a little synergy at Berkshire, finally. Who knows?