Last weekend was the Berkshire Hathaway annual shareholder meeting. For decades, Warren Buffett and his business partner, Charlie Munger, have hosted the annual meeting around the 1st of May. The biggest highlight of the annual event is up to 6 hours of Q&A with Buffett (92) and Munger (99). I attended the meeting, which is held in Buffett’s hometown Omaha, NE, for ten straight years beginning in 2007. Then life started getting more complicated with kids, a dog, etc. Fortunately, Berkshire started streaming the event live on the internet around 2017. This year I listened to the morning session in Cambridge, MN while my wife and kids took turns participating in a horse show at the fairgrounds. Here are a few things I found particularly interesting:
- Slowing business activity – Buffett said at this point in the year, he anticipates most of their subsidiary businesses will post lower profits in 2023 compared to 2022. This is a very interesting point given Berkshire Hathaway’s vast collection of businesses. Although most people know Buffett for his legendary stock picking, few people realize how many businesses Berkshire Hathaway owns outright. The last time I checked, it was approximately 80 companies. Some of the bigger names you’d recognize include: Geico Insurance, Burlington Northern Santa Fe, Fruit of the Loom, Dairy Queen, Forest River, Netjets, Helzberg Diamonds, the Pampered Chef and See’s Candies. The vastness of Berkshire’s business holdings provides Buffett tremendous insight into the direction of the broader economy. Thus, I took note when he said they are seeing signs of slowing.
- Opportunities for value investors? – There was a question about the future of value investing given the rapidly changing world (artificial intelligence, etc.). Buffett and Munger offered a rare difference in opinion. Charlie Munger said he believes the future of value investing will be much more challenging owing in large part to increased competition. Munger has discussed this in recent years. He has pointed out that stock market returns were so bad from the late 1960s through the early 1980s, that many investors had given up. Not only had the public lost interest, but there were far fewer professional investors. Today the situation is much different with entire television networks, websites, blogs and so-forth focused on investing 24-7. However, Buffett provided a different perspective. He said he believes there will always be significant opportunities for the enterprising investor particularly in smaller areas of the market where it’s difficult for the big money managers to participate.
- More trouble for banks? – Buffett and Munger both see more turmoil in the banking sector ahead. They talked about how they’ve sold nearly all their bank investments over the last 6-months with the exception of Bank of America. This was a particularly interesting part of the annual meeting. Buffett and Munger provided long articulated commentary on their experience investing in banks and how virtually all banking crises are the same. It almost always comes down to poor risk management and they blamed mis-aligned incentives as a major factor (there’s usually no major consequences for a CEO or board of directors if a bank fails).
- How to live a good life – There will often be general questions during the meeting and one was something about living a good life and avoiding mistakes. Buffett quipped that a great approach is writing your own obituary and doing everything you can to live up to it. He went on to say just being kind goes a long way. He said he’s never known a kind person who died without friends but he’s known a lot of rich people, who weren’t so kind, that did.
- Pure Business Genius – I’ve studied and followed Warren Buffett closely for nearly 20 years. Every year my respect grows. Listening to him take questions for nearly 6 hours on a wide range of subjects at age-92 is just amazing. His recall of random business figures or economic data from decades ago is incredible. I don’t think it’s a stretch to say that Buffett is unmatched in his breadth of business knowledge. To top it off, what I’ve always admired most about both Buffett and Munger is they’ve not only been successful in business, but they’ve practiced and preached ethics and principles throughout their careers setting an exemplary example for others.