Warren Buffett: Wrong-Headed Hypocrite on Foreign Stocks?

You can credit Warren Buffett for a lot of things, and consistency is one of them. Through the years, he has almost unwaveringly stuck to his investing precepts, and he’s the third-richest person in the world.

Sure enough, on Thursday, he reiterated one of his tenets: Stay with US stocks, and by implication, don’t bother with international names. “You really want to bet on America,” Buffett said in a CNBC appearance, where he also noted that the US economy has slowed. “God has blessed America.”

While saying so may be heresy, perhaps the iconic Buffett is wrong about this. And maybe deep down he knows it, having made a hefty purchase of a foreign stock in 2018.

The stellar market record of his company, Berkshire Hathaway, would seem to support the wisdom of his US-only advice. Over the past 10 years, the S&P 500 (composed of only American stocks) has advanced 15.4% annually, versus the MSCI index covering all non-US stocks, 8.3%.

But with half of the world’s stock valuation outside the US, does his prohibition on overseas equities make sense? Especially since emerging market countries, or at least some of them, have a lot more room to grow than does a developed nation like the US.

Domestic stocks trailed both Europe and Japan’s equities in the 1970s and 1980s, and from 2001 through early 2008, according to MSCI. True, during those times, the US economy mostly enjoyed healthy growth. An investor who shunned the rest of the world, though, lost out on an opportunity.

Still, Buffett has shown that he can change his mind. Once, he abhorred airlines, which he called a “death trap” for investors. The same was true for tech firms—he said he didn’t understand them. Well, as of  Berkshire’s most recent filing, it holds American and Delta, as well as Apple and Red Hat.

And last year, Berkshire bought a $60 million stake in Teva Pharmaceutical, which is an Israeli outfit. This is a real value play because the drug firm is stumbling under its large debt load. Berkshire did not return a request for comment. 

Who knows, despite his continued US-centric rhetoric, maybe Buffett will buy more overseas stocks. He always has counseled to invest against the grain—and that may include his own advice.