Cautious Buffett looks to Europe and Japan

WARREN BUFFETT, the legendary American investor, has repeated his warning that share prices are overvalued, saying there are few companies that now meet his test of being a good business whose stock sold is sold at an "intelligent" price.

Speaking at the annual shareholders' meeting of his Berkshire Hathaway investment vehicle in Omaha, Nebraska, Mr Buffett said UK companies looked better value, but he declined to give details on what stocks he might buy. "We've looked at a number of businesses there [in the UK]," he said. "In some cases the prices look a little more reasonable than they do here."

On the identity of the UK blue chip in which he has taken a small stake, he said: "It starts with the letter A through Z... It's not a bombshell. We've said more than we intended to say."

Returning to the American market, Mr Buffett said he was "suspicious" of sharp rises in the US market, a repeated pattern that "leads to excesses". His business partner, Charlie Munger, said the group did not like "go- go periods" that result in "waves upon waves of irrational buying".

Both admitted they were going against the grain in taking this view of the meteoric rise in so-called Internet stocks, which 68-year-old Mr Buffett says he does not understand. His website makes no bones about his dislike of the Internet, stating in his "chairman's message" that he is a technophobe who cannot use e-mail.

The three-day shareholder event, attended by around 15,000 private investors, has become something of an annual pilgrimage for the devotees of Mr Buffett, known as the "sage of Omaha" for his wisdom on the stock market. Investors travel miles to attend the jamborees, visiting a baseball game the day before the meeting and booking themselves a table at Mr Buffett's favourite burger bar (if they can get one).

Mr Buffett, the second-richest man in the US after Bill Gates, told shareholders the company's stance was cautious towards the hype in the US market but seeking to make acquisitions abroad in the next year, particularly in Japan and possibly in Britain, France or Germany.

Part of his job, he said, is to invest the huge amount of capital accumulated by Berkshire Hathaway, whose current cash position is estimated at $15bn (pounds 9.3bn). The group, which earned $2.8bn last year, needs to make large investments if they are to have an impact on earnings growth.

"Japan has opportunities on a large scale, which particularly intrigues us," he said, adding that he had just missed an opportunity last year when he was pipped at the post by a quicker investor after he disclosed plans to buy into an unnamed Japanese company.

Known for investing in companies he likes and holding the stock indefinitely, Buffett invests in or owns businesses such as General Re, Coca-Cola, American Express, Walt Disney and Gillette.

In spite of a less-than-stellar year for Berkshire Hathaway, whose market value rose by just 2.8 per cent in 1998, Mr Buffett remained upbeat in his address to shareholders.