Berkshire Hathaway

Berkshire Hathaway Annual Meeting: Top 5 Takeaways

 

Attend the Berkshire Annual meeting and you'll quickly realize it's a bit like drinking from a fire hose.  There is an astounding amount of content covered during this event and every word spoken carries an immense amount of meaning and content.  Summarizing six hours worth of wisdom is no easy task but here's my best attempt.  

IMG_9326.JPG

1.)    Focus on the big picture and stay the course – Warren acknowledged the “noise” in the markets, whether it be interest rates, trade, or politics.  He overlayed that with countless observations and statements proving that there’s always been noise.  He has lived under 14 of 44 presidents (7 republican, 7 democratic), he’s lived thru wars and terrorist attacks, he’s witnessed all levels of interest rates – and yet, throughout it all, GDP per capita has increased 6 times and the stock market has gone from Dow 100 to Dow 24,000.  We’ll never get rid of the noise – but we can put in some earplugs and continue to invest in businesses

2.)    Productive vs Non-productive assets  - when asked about Bitcoin, Warren and Charlie focused squarely on the distinction between productive and non-productive assets.  With a productive asset (like a stock or a farm), you benefit from ongoing cash flow and appreciation in the price of the asset.  With non-productive assets (like bitcoin or gold), all you are counting on is that the next person will pay you more (based upon their belief that someone else will pay them more).  You are speculating on price – not owning an asset that has the ability to produce something on your behalf.  Always know what you own and why you own it

3.)    Trade – As they simply stated, everyone wins when there is free trade.  US and China are the dominant economies in the world and Warren & Charlie don’t anticipate either will do anything foolish when it comes to trade.  Warren did remind us that some citizens (ie: US factory workers) may be personally harmed by trade negotiations  and that America must not leave them behind

4.)    Perfection is unattainable – Even Warren and Charlie make mistakes.  They openly admitted to having missed the opportunity in Google and Amazon.  They acknowledged the damage that has been done at Wells Fargo.  They expressed challenges in putting cash to work for new deals.  They reminded the audience to always keep learning (from mistakes and successes) 

5.)    If you are in a position to try, you should–  Health care costs have risen to 18% of GDP (from 5% of GDP in 1960).  No one would disagree that the system is in need of major improvement.  Berkshire has joined forces with JP Morgan and Amazon to explore solutions and refinements to the health care system.  Warren and Charlie both acknowledged it wouldn't be easy - but as Warren said "We are in a better positioned than most to try - and so we should do just that"

181 years of combined wisdom (between Warren and Charlie) was a privilege to experience.  I have at least 50 more takeaways that will make me a better student, investor, learner, and human being.  Thanks again for having us.  Until next year!

Berkshire Hathaway Annual Meeting: A Master Class

This was my first time attending the Berkshire annual meeting.  I always thought I had a pretty good idea what the weekend entailed.   But it wasn’t until I went to Omaha and lived the experience that I was able to see it for what it really is – A Master Class in community, investing, business, and friendship.

Community

IMG_4910 (1).JPG

From the minute I arrived in Omaha, I could feel the energy.  The hotel lobby was filled with people wearing their Berkshire badges.  Signs on local restaurants welcomed shareholders.  Locals shared with me that I was now known as a “Berkie.”  Everywhere you looked and everywhere you went, you felt welcomed into the family, all of whom had come home to Omaha for the annual gathering. 

IMG_9407.JPG

 

Friday before the meeting is “expo day,” a chance for shareholders to take in exhibits of the various Berkshire holdings and shop their various wares.  It is truly a sight to see!  Thousands upon thousands of people – smiling ear to ear as they ate their Dairy Queen dilly bars, climbed aboard a model Net Jet, stood in line to shop the likes of Pampered Chef, Sees Candy, Coca-Cola, and Fruit of the Loom, and purchased logo'd ketchup from Heinz, boots from Justin’s, or a new living room set from Nebraska Furniture Mart.

IMG_9408.JPG

Everyone you meet asks where you are from and what number of meeting this is for you (this rookie was welcomed with opened arms!)  People stop to pose with cut-outs of “Warren and Charlie” – men so iconic in this crowd that they are known instantly by their first names or by their caricatures on the backs of the commemorative Brooks’ running shoes.

IMG_9410.JPG

Saturday is the main event.  While doors don’t open until 7am, since it’s open seating in the arena, I was informed by my group that people got in line far before the sun rose over the Missouri river.  Wanting to take no chances with my first visit, I volunteered to get our spot in line, reaching the entrance to Century Link arena just before 4am.  While I was not the first person, I happily took my place in line behind four others.  I was promptly joined by a few fellow shareholders – Andy, who was from my hometown in Ontario, Canada (no kidding!) and Ran, from the Bay Area.   As the hours passed and our respective groups joined us, we shared our investing journeys, our thoughts on what questions should be asked in the meeting, our hopes for the day, and a welcomed hot cup of coffee!  As the Wall Street Journal aptly said in Saturday’s paper, waiting in line at 4am is a great way to make friends.

It’s hard to pinpoint any one thing that creates this sense of community among a group of 42,000+ relative strangers from all different walks of life.   Whether it’s a set of shared values (around investing and life in general), a common interest in business, or a love for this company and its founders, everyone there is a proud member of the same community – and it’s a powerful thing.

IMG_9352.JPG

Investing

The meeting begins at 8:30, with a video reel of company highlights and funny clips & vignettes.  And then, it's down to business.  Warren and Charlie take their place at a long table on a raised stage – both equipped with binders, newspapers, Coca-Cola, and See’s peanut brittle.  Typically, the questions begin immediately, rotating between three analysts, three reporters, and the audience.

This year was different.  Warren started the meeting by doing what he does best – teaching.  He predicted that the questions would inevitably focus on shorter-term items and recent events (ex: interest rates, trade, presidential administration, individual stocks, etc).  Before he embarked on those questions, he wanted to spend a moment illustrating why a longer-term perspective is essential.

Using the New York Times from March 1942 (the time he bought his first stock (with his dad’s help) at the age of 11) as a visual aid, he showed that the world was a volatile place at that time – full of bad headlines and scary world events.   There were concerns over the war, concerns over America’s future, and downward movement in the Dow as it broke below 100 points.  Despite that, he had the crowd assume they had still made a $10,000 investment in the US stock market at that time and done nothing else, beyond reinvesting dividends until present-day.  He then shocked most in the audience by showing them such a portfolio would now be worth $51 million.   His point?  There has always been, and will always be, “noise” in the system.  But America and its growth story have prevailed – and he has no reason to believe that this time is any different.

The question and answer period then began and the investment teachings continued.  Specific topics covered included valuation, dividends vs buybacks, technology stocks, trade wars, bitcoin, and health care.  No matter the topic or the question, Warren and Charlie took a stance and explained their thinking in precise detail. 

Business

IMG_9326.JPG

From 9:15 am until 3:30 pm (with a short hour-long lunch), Warren and Charlie held court and gave the audience so many insights as it relates to business in America.

So much can be learned from how they choose to run their own company – there are 25 people at headquarters. No committees and no bureaucracy.  They don’t meet with analysts, choosing instead to report earnings on a Saturday to a crowd of 42,000 shareholders – all together and all treated equally.

Much can also be learned by how they view and speak of the companies they own – such as Wells Fargo (disappointed by the events but confident situation has been addressed and company will move forward), Apple (would gladly own 100% if they could, which is how they know it’s an excellent business), and American Express (a powerful brand with a strong moat).  They know these businesses and they are proud to own them.

Friendship

IMG_9383.JPG

This event is one of the greatest illustrations of friendship I have ever witnessed.  First and foremost, a classic friendship plays out on the stage:  that of Warren and Charlie.  They both speak often of the fact that while they’ve disagreed, they’ve never had an argument in the 50+ years they’ve worked together.  Warren openly states that his life is better for having had Charlie in it and both respect who the other is and never speak an ill word about the other.  It’s a remarkable relationship to witness and one that undoubtedly has contributed to the "magic" of Berkshire.

The lessons in friendship don’t stop there.  I was lucky enough to make the trip to Omaha with two great friends – but I left with at least 10 more!  From their friends & family that I met thru the event to my new friends from the 4am line, it was truly a privilege to forge such strong connections.

This event isn't just an annual meeting.  It isn't just a fun social event. It isn't just an incredible learning opportunity.   It's a master class, open to any and all members of the Berkshire family.