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Munger: hard to find Berkshire deals, 'raving mad' not to try

By Jennifer Ablan and Jonathan Stempel

OMAHA, Nebraska (Reuters) - Warren Buffett's Berkshire Hathaway Inc would be "stark raving mad" to rule out another giant acquisition like its 2009 Burlington Northern takeover, but high prices have now made attractive targets scarce, its vice chairman said on Friday.

In an interview with Reuters on the eve of Berkshire's annual shareholder meeting, Charlie Munger said the company has over the years made many of its most desirable purchases in periods of "great catastrophes," but little appears on the horizon at present.

"With interest rates at zero, the prices being paid for businesses are very high," Berkshire's second-in-command said.

Munger said Berkshire would welcome another purchase on the scale of its $26.5 billion takeover of Burlington Northern Santa Fe Corp in 2009.

"Everybody would like it," he said. "But just because you like it doesn't mean that the world will necessarily give it to you. You'd be stark raving mad if you were running Berkshire and didn't want another Burlington Northern. But how many Burlington Northerns have we done in 50 years?"

The Federal Reserve's "quantitative easing" policy known as QE3 to juice the fragile U.S. economic recovery has sent yields declining and asset prices rising including housing and commercial real estate markets.

"Sometimes the macro economic tide is working for us - and sometimes against - and we just endure whatever direction it's flowing cheerfully," Munger said. "So we are not people who think know all the answers about predicting macro economic fluctuations."

The views of Munger, 89, usually mirror those of 82-year-old Buffett, who is perhaps the world's best-known and most influential value investor. The pair have worked together for decades in delivering consistently handsome returns for its shareholders. As such, Berkshire carries enormous clout within investor circles when it tips its hand about a specific company or a particular industry.

Munger's comments suggest that investors who have been waiting eagerly for Buffett to use his "elephant gun" again to add another large company to his portfolio may have to wait. The issue is expected to be a hot topic at this weekend's meeting, held every year in Buffett's hometown of Omaha.

The meeting and related events - what Buffett likes to call "Woodstock for Capitalists" - usually draw 35,000 people to the city. The main attraction is always a marathon, five-hour session in which Buffett and Munger field questions from shareholders, journalists and analysts.

NO PLAN TO 'OUT-APPLE' APPLE

Berkshire, which owns more than 80 businesses in such fields as car insurance, chemicals, energy and retail, could use the meeting this weekend to signal the direction it will take in the coming year.

Munger on Friday gave no indication that technology was likely to be a focus.

Despite a recent large investment in International Business Machines Corp, the company has long been underweight in technology companies such as Apple Inc, in which it has no reported stake.

When asked if Berkshire may consider an investment in Apple, especially now that Apple's share price has tumbled in recent months, Munger said: "The whole world admires the achievements of Apple. On the other hand, you could hardly think of another business that is more un-Berkshire-like than Apple."

"We really hate trying to invent whole new, novel technologies, one after another. We wouldn't be as good at it as Apple is. So we're not trying to out-Apple Apple."

Berkshire prefers larger, easy-to-understand businesses with consistent earnings power, good returns on equity and strong management.

The recent $12 billion investment that Berkshire agreed to make in H.J. Heinz Co, part of a $23.2 billion takeover, differs from most of its acquisitions because it will not have much say in how the ketchup maker is run.

Munger, though, said such an arrangement is not unprecedented for Berkshire.

"We did more or less exactly the same thing when we helped the Mars family buy Wrigley," he said, referring to the $23 billion takeover of the chewing gum company, announced in 2008. "So this is not something new for Berkshire. This is the second time we've done something like this - it's just a different partner. I wish we had a third one to do tomorrow."

ECONOMIC, GEOPOLITICAL RISKS

Buying and investing in solid businesses have helped Berkshire outperform other companies during down periods for the economy, including 2002 and the deep recession in 2008 and 2009, Buffett has said.

Munger said the stimuli provided to the economy after the financial crisis was necessary, but said it is unclear how best to unwind it, including the Federal Reserve's "quantitative easing" policy known as QE3.

He called the bi-partisan response to the Great Recession "intense and extreme and it should have been." He added: "But now, knowing exactly when we should stop and how we get off the back of the tiger, I think everyone is a little confused including the people in charge."

Uncertainty also prevails outside the United States, but Munger said Berkshire takes it in stride.

He pointed to Berkshire's recently completed purchase of all of Israeli metalworking company Iscar, and its investment in shares of South Korean steelmaker Posco.

"Just as Berkshire was going to buy in Israel with Iscar, we are willing to own a little stock in Posco right across from North Korea. We have enough favorable factors going for us. We're willing to endure whatever extra risk there is."

(Editing by Frank McGurty, Bob Burgdorfer and Matthew Lewis)

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