Warren Buffett EXPLAINS WHY HE SOLD McDonald's 🍔🍟 Everything he ever said about the sale 🥤

Warren Buffett and Charlie Munger explain why they sold McDonald's and also admit it was a big mistake.

This is everything they ever said about the sale of their McDonald's stake

In 1996, Warren Buffett bought shares in McDonald's, but within just 12 months, he sold them again.

This is not typical of Buffett, who is known for holding his stocks for many years.

In this clip, he explains everything you need to know about the sale.

He also compares McDonald's to Coca-Cola and Gillette, and discusses the difference between the food industry and the consumer product industry.
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It’s not our natural inclination to sell.

And on the other hand — and we have held the Washington Post stock since 1973. I’ve never sold a share of Berkshire, having bought the first shares in 1962.

And we’ve held Coke stock since 1988. We’ve held Gillette stock since 1989. Held American Express stock since 1991.

We sell — really when we think that we’ve — when we’re reevaluating the economic characteristics of the business.

We probably had one view of the long-term competitive advantage of the company at the time we bought it, and we may have modified that.

We think McDonald’s has a fine future. We think Disney has a fine future.

But we probably don’t think that their competitive advantage is as strong as we might have thought — as we thought it was — when we initially made the decision.

We think that the strengths may have been eroded to some degree.

A classic case on that would be the newspaper industry, generally, for example.

I mean, in 1970, Charlie and I were looking at the newspaper business. We felt it was about as impregnable a franchise as could be found.
We still think it’s quite a business, but we do not think the franchise in 2002 is the same as it was in 1970.

We do not think the franchise of a network television station in 2002 is the same as it was in 1965.

I said it was a mistake to sell it, and it was a mistake. And I just reported that in the interest of candor.

But I didn’t think it belonged in the list of eight or 10 of the businesses, of the very few businesses, that we want to own in the world

My guess is that with 23,000 locations all over the world, I think it would be extraordinarily difficult to separate the real estate business out from the franchising business at this point.

But I just think the problems would be horrendous. Certainly you wouldn’t want to sell it and lease it back because you would not end up with more value, in my view, by doing that.

And spinning it off in a real estate trust or something, with operating in 100-plus countries, and with all of the franchise arrangements, I think it would be a huge, huge problem.

You should look at McDonald’s as being a very good business, but one that will continue in its present mode vis a vis the real estate.

And the multiple is not greatly different, in my view, than if the real estate were separate

You won’t get the inevitability in food that you will get in a single consumer product, you know, such as blades

They’re happy with the product.

Decisions on fast food, as to where you eat, is simply based on which one you see. I mean, convenience is a huge factor.

If you are going by a McDonald’s, or a Burger King, or a Wendy’s, and you happen to be hungry at that point, if you’re traveling on the road and you see one of those signs up, you’re probably going to stop at the one you see.

Most people want to vary where they eat as they go through the week, or the month, or the year.

They don’t really have any great desire to vary their soft drink the same way. It’s not the same thing.

So it’s no knock on McDonald’s at all. It’s just the nature of the kind of industry they’re in.

One of the ones I admire most is McDonald’s.

I had fun once at a major university when I said I thought McDonald’s succeeded better as an educator than the people in the university did.

And what I meant was McDonald’s hires a lot of people who are quite marginal at the very start of their working career. And they learn to show up on time for work and observe the discipline.

A lot of them go on in employment to much higher jobs. And they’ve had an enormous constructive effect about educating into responsibility a lot of people who were threatened with not making it.

So I think we all owe a lot to the employment culture of McDonald’s. And it’s not enough appreciated.

[kellymcclendon]

This guy will never divulge the real reason why he makes a decision to the public.
Just speaks in general.

[johnbailey]

I owned McDonalds from 1975 to 2019. Did Buffett screw up by selling MC? He sold at $25 in 1997. I bought 1, 000 shares of MCD for my son's custodial in 2003 at $12.65, so maybe it was a bigger mistake for him not to repurchase MCD 5-6 years later.

[siphotheguy]

Reporter "Mr Buffet, can you tell us why you sold MacDonalds?"
Warren Buffet "I'm not lovin it"

[MartinRegistreye]

Nice to still hear Charlie, sad he's gone

[ronaldkovacs]

Understandable argument, but I would imagine regular fast food customers will cycle through the various brands and somebody who eats at Wendy’s today will probably go to McD tomorrow, KFC the next day then repeat. No real loss, it is simply an industry that offers many brands to consumers. It is not an exclusive marketplace, never intended to be.

[tahneetran]

IMO - Mr. Buffet used statistics and chose Gillette over McDonald's as a better investment because he changed his confidence interval estimates because Gillette has a lower standard of deviation.

[albertseabra]

Warren and Charlie Munger are 2 fabulous persons.
Low profile in their personal lives, sharp, bright, and with impressive track records.
Love to watch them

[chinashorts]

Macdonalds used to be strong because it was unique: Fun for kids, cheap decent food. The food isn't cheap anymore, it's expensive. It's entering into the final stages of any corporate business where the values of the founder are long gone, and the profit squeezing begins. They will never innovate again. With their prices high while serving low quality food, they will die. You can't be the lowest quality on the block and charge the same as everybody else. It's not sustainable.

[hanselpollack]

I have to say, being just a little younger than Warren, and Charlie, that people are drawn to McDonalds. They will pass Burger King, Wendy’s, Jack in the Box, Taco Bell, Carls Junior, etc. to find a McDonalds. Why? Who knows?, But, nevertheless, it’s “not all the same” to customers. There is a trust, a childhood experience, a simple comfort, not found in the other fast food outlets. Sometimes it is by default, because it’s more available, than its competitors. All this is an amateur stab at a phenomenon not yet understood. BTW, In-n- Out Burgers, and Chick fil-A surpass everyone. Another enigma!

[plica]

They bought McD at $21/share in 1996 but sold it all for $25/share in 1997. As of Dec 2023 it is now at $291/share. Ouch!

[freethoth]

I wonder if he feels any guilt over becoming a billionaire by investing in a product that causes obesity, diabetes, malnutrition, and dental caries, and is one of the greatest contributors to the world's plastic pollution. The soft drink industry has caused a great deal of decline in the health and well being of our nation, but hey, there was money to be made.

[ianstallings]

I wonder how many videos have been made out of clips from this meeting. It's gotta be a cool million.

[proteusaugustus]

The margins for fast food are tanking. It's one thing to buy a meat glue chicken sandwich; it's another to pay premium prices for it. They are pricing out those who would eat it. Not going to pay $20 for a Mac lunch. Not happening. Fast food is on its way out. Period.

[Pizza-gbch]

He eats at McDonald's most mornings.

[magin]

He sold it because he saw they had legal battles coming up over the products in the meat and the chemical residue that was being found, they actually got sued and lost.

[Zordiak]

I'm convinced Warren Buffett was born old

[jwg]

Biggest problem with McD is that it's a REIT in sheep's clothing. Their food is astronomically priced.

[anhvu]

If some of you are so good at investing maybe you should do something about it and get rich instead of on youtube

[maalikserebryakov]

If we were all clued up on investment as much as buffett back in the eighties and nineties likely all of us would have instantly bought McDonalds and never let go.

But Buffett didn’t. Why? Because his knowledge of thr food industry told him a few things:
(1) People like to change their food consumption a lot.
(2) if given a choice, a consumer would jsut as well run to a kfc or a chipotle if it was closer.

And based on these concerns, he completely missed out on McDonalds.

This shows the depth of Buffett’s caution. It is almost Paranoia. And yep he stays away from the food industry in general.

[tucobenedicto]

Although he says he'd never invest in a food business, he tried actively to buy stakes in In-n-Out, but the owner wouldn't sell to him.