5:44 PM PT
Olympia, WA
This last May, I attended the Berkshire Hathaway Shareholder Meeting for the first time. In case you didn’t know, Berkshire Hathaway is Warren Buffett’s holding company that he has used as his investment vehicle for the majority of his career. Warren Buffett is considered the best investor of all time, so for me and many people who have gone to work in the field of finance and investing, he serves as an aspirational role model. Warren Buffett held Berkshire Hathaway’s first annual shareholder meeting in 1973, and over time it grew to where by the mid 90’s it became a major event in the world of finance. Today, over 30,000 people attend every year, and the meeting serves as a mecca for value investors and capitalists that follow Warren Buffett’s investing and business philosophies. The actual meeting itself is a one-day event where attendees can ask Buffett questions about a variety of topics, and additionally there are a number of other investing related events that take place surrounding the meeting. It was always in the back of my mind to attend the shareholder meeting someday, but it wasn’t until I thought about how old both Buffett and his business partner Charlie Munger were that I realized that if I wanted to go, it should be sooner rather than later. That put a sense of urgency on it, and so it was enough to convince me to go this year, and I can say that it was well worth the trip! Unfortunately, Buffett’s business partner Charlie Munger passed before the meeting this year, but it was a great experience regardless. Munger’s legacy will be remembered.
I had a lot of takeaways from the event about life, investing in the current climate, and overall investing philosophy that I thought would be good to share.
On life:
A large portion of the meeting was dedicated to Charlie Munger due to his recent passing, so many thoughts were shared on how he lived his life. One question that was asked was “If you had one more day with Charlie, what would you do with him?” Buffett responded by saying, “We always lived in a way where we were happy with what we were doing every day.” He then said, “What you should probably ask yourself is that who do you feel that you’d want to start spending the last day of your life with? And then figure out a way to start meeting them, or tomorrow, and meet them as often as you can, because why wait until the last day? and don’t bother with the others.” There were plenty of other nuggets of knowledge and wisdom, but that was definitely the highlight.
On investing in the current climate:
One thing to note about Buffett’s comments on investing and markets when they are timely is that he talks very diplomatically as his comments could potentially move the markets. Despite his diplomatic way of speaking, we can still read between the lines to garner some insights. Reading between those lines, overall he came across as possibly the most negative I had heard him, and if you look at his recent actions, they are aligned with that view.
One notable action he made during the quarter was a sale of a good chunk of their stake in Apple. They still own a lot of shares of Apple, so this doesn’t signal that it’s the end of the world for Apple or anything like that, but it was a sizeable sale. He discussed how Apple is an amazing business, and he said that the primary reason for the sale was for tax purposes, as he expects tax rate to rise in the future, but it’s hard to take that answer at face value. Buffett is known as a lifelong value investor. When he first bought Apple shares in 2016, he paid close to 10x earnings. Everyone was less optimistic about Apple at this point. Now, everyone believes the sky is the limit for Apple, and it now trades above 30x earnings. I don’t believe anything he said is false, but I would say the primary reason for the sale is likely due to this big valuation adjustment. Buffett likely doesn’t see very much upside from here given the risk.
When talking about opportunities that are out there, he emphasized that he saw almost no opportunities for investment that he thought could move the needle for Berkshire. That’s not a very positive thing to say. However, he did make two minor exceptions. The first was that he said there was one idea they were looking at in Canada just recently. It just likely isn’t something that would move the needle much given their size. Also, when asked about India, he came across quite positive. He said that a more energetic investor would likely be able to find a lot of opportunities there, but given his age, he is a bit past that point, so it’s not an area he is looking at, but he believes there is opportunity there.
Interestingly enough, when asked about China, he said, “Well, we look at your money, which we couldn’t bear to lose, and we feel that we’re far less likely to make any truly major mistakes in the United States than in many other countries.” He didn’t have this same tone when he was speaking about Canada or India, so it suggests he is quite negative on China, especially given that China is a place where they have invested in the past.
Overall, his thinking aligned pretty closely with ours right now, so it’s good to hear that the Oracle of Omaha has the same thinking as we do.
On investing philosophy:
A good question was asked by someone – “if tomorrow you woke up in the body of a 20-year-old American, your name was now Warren À la carte, and you had some money to invest on a full-time basis, what method or methods would you use to achieve that (50%) return?” Buffett’s response was interesting, because he basically said that his strategy would be very different from what it is now. He said “I don’t know what the equivalent of Moody’s Manuals or anything would be now, but I would try and know everything about everything small, and I would find something. And with a million dollars, you could earn 50% a year.” Essentially, he is saying that he would be looking at all the lesser-followed, smaller business situations that get the least amount of attention and investing in the ones that look good. This is vastly different from how he invests today, and it is also vastly different from how institutions, Wall Street, and most people invest, but if you want to achieve large returns, this is what Warren Buffett recommends. Due to his capital constraints, how he invests today is far different from what he believes is the best way to invest, and most people try to copy the Buffett of today rather than the younger Buffett.
There are plenty of other takeaways, but I won’t list them all out for the sake of brevity. Overall, it was a great trip, and hopefully Buffett is still around for another attendance next year.
