Warren Buffett Explains His Big Bet On Precision Castparts

In its largest acquisition ever, Warren Buffett's Berkshire Hathaway is buying aerospace supplier Precision Castparts for about $32 billion. Buffett explained the importance of the deal to FOX Business Network’s Liz Claman.

“It’s a company making very important parts for very important machines, namely aircraft,” Buffett said. “It is a supplier to those companies -- Boeing, GE, United Technologies, Rolls-Royce -- and the company’s just extraordinarily good at making some very complicated, sometimes highly technical parts.”

He added, “they’re the most reliable supplier you can have. If you’re putting an aircraft together, you want to be sure you’ve got the right parts coming at the right time.”

Buffett said one of his investment managers put the company on his radar.

“Todd Combs, who manages money for us, he’s been with us about five years. He manages $9 billion. He’s owned the stock for about three years and you’ve got to give him credit for the deal… Over the last three years he’s educated me on it… I’ve followed it,” Buffett said.

The Oracle of Omaha told Claman he wasn’t concerned with the short-term outlook of the company.

“We are not buying [Precision Castparts] to hold it for six months or six years. We’re planning to hold it forever, so we don’t really look at the short-term outlook in terms of making decisions on stocks or businesses,” he said.

Buffett said the deal will take some time to close and that he anticipates Berkshire Hathaway will likely borrow about $10 billion to finance it.

When asked if a potential interest rate hike in September might change that, Buffett said:

“No, it really won't.  I mean it wouldn’t – [Yellen] won't change it that much.  If they do change… but no, that -- whether rates are what they are now or a half a point higher or a point higher, will not -- that will not change it.  Main thing we want to decide is how much cash we want to have left around,” he said.