2018: When would Buffett buy more than 10% of a public company?

AUDIENCE MEMBER: Hi, Ben Sherber (PH), Topeka, Kansas. Just want to say, Warren and Charlie, thank you again for hosting us all. This is a great event.

WARREN BUFFETT: Thank you.

AUDIENCE MEMBER: My question is about the recent decision to sell shares back of Phillips 66. Not to put you on the hot seat. But right after that, share prices jumped up about $22 a share.

You mentioned at the time that there’s some regulatory requirements if you own over 10 percent of a company. Could you talk about the factors that go into how you decide whether to retain more than that or get under that threshold? And then what are your thoughts long-term on Phillips 66, like, their business mid-stream refining?

WARREN BUFFETT: Yeah, well, it was the City Service preferred of last year. (Laughter)

We sold the stock at around 93 or ’4. And it’s probably 115 now. But we own just under 10 percent of the company. And the more Ted [Weschler] and Todd [Combs] and I think about various problems connected with regulatory problems and trading problems and so on, overwhelmingly we will stick below 10 percent on marketable security holdings.

We’ve done it with the airlines. Now that does not mean we’re going to reduce our holdings in American Express or anything of the sort.

But — and Greg Garland has done a great job at Phillips 66. We’ve had very good relations with the company. They’re very — he’s a very, very, very experienced and sensible manager.

But I did decide that I wanted to be below 10 percent in that holding. And we, like I say, we’ll stay just slightly under 10 percent of Wells Fargo.

We’ve actually sold a few shares just to stay below 10 percent in the case, I think, of both American Airlines and United Continental.

Unless there’s something unusual we’re going to stay under ten. But we have nine and a significant fraction percent of Phillips. And I think they’ve been good at operations. I think they’ve been good at capital allocation.

We traded them a business — we traded them stock for a business some years ago, which has been a very nice business that we’ve retained in operation.

So we’ve got a lot of money still in Phillips. And I wish I’d made the deal at a higher price. But we made money on what we sold and we accomplished an objective.

Charlie?

CHARLIE MUNGER: Well, we like the subsidiary [Phillips Specialty Products] we traded the stock for. (Laughter)

WARREN BUFFETT: I missed that —

CHARLIE MUNGER: We traded the stock for a subsidiary.

WARREN BUFFETT: Yeah, well, yeah.

CHARLIE MUNGER: We like the subsidiary.

WARREN BUFFETT: Oh yeah. Well, it improved —

CHARLIE MUNGER: It isn’t like the stock went away for nothing.

WARREN BUFFETT: Yeah. Yeah, actually we’ve done pretty well with Phillips.