Buffett’s Shareholders Meeting: Value Investment Never Ends

What have been the changes in the views of the Omaha Prophet on the market?

On May 4, 2024 local time, the annual meeting of Berkshire Hathaway, also known as the Capital Woodstock Music Festival, was held in Omaha, USA. At 5am, the CHI Health Center venue was crowded with people queuing up to get closer to the “stock god”. Although Omaha welcomed everyone with light rain and strong winds, no one cared about it.

After a year of ups and downs in the financial market, investors returned to Omaha to exchange experiences and listen to Berkshire Hathaway Chairman and CEO Warren Buffett once again share their investment philosophy and true meaning of life. The annual Berkshire shareholders meeting attracts the attention of investors around the world, making it a grand event. The Omaha prophet Buffett and his former partner Charlie Munger have created a massive value investment ecosystem, bringing approximately 40000 investors from around the world to an inconspicuous small city in the central United States every year as scheduled, which is undoubtedly a spectacle.

Salute to “Old Partner” Munger

Buffett’s successor, Berkshire’s non insurance business leader Abel, sits in the middle, insurance business leader Jain sits on Abel’s left, and Buffett sits on the right, although he is the focus of the audience.

Compared to previous years, the departure of “old partner” Munger has turned the originally witty “double talk comedy” into Buffett’s own talk show. Before the conference began, Berkshire aired a short film paying tribute to Munger. At the end of the video, Buffett referred to Munger as “the architect of Berkshire.”.

Zhang Yun, partner and executive vice president of Alger Asset Management, told First Financial after attending the meeting, “To some extent, it was Munger who created Buffett’s legend. Although Munger’s departure may signify the end of an era, this Berkshire ship is still moving steadily because Buffett has done a lot of work in inheritance, which is his wisdom.”

As the conference began, the Prophet of Omaha repeatedly mentioned Munger. Buffett praised Munger as a trustworthy business partner, but he could also seek support from others or places. “I completely trust my children and my wife, but that doesn’t mean I ask them what stocks to buy. But in terms of finance, for decades, no one in the world has been more suitable for conversation than Charlie.”

Recalling the past, Buffett said that Munger always followed his instructions, but only twice did he not. One time is to invest in BYD, and the other time is to invest in Costco. Buffett believes that Munger is right in investing in both companies at crucial moments.

Whitney Tilson, a well-known investor and Berry research editor who attended the shareholder meeting for the 27th consecutive time, described his emotions to First Financial reporters as follows: “The first time there was no Munger at this meeting, it felt uncomfortable because Buffett and Munger had always attended together. The highlight of the meeting at the beginning was Buffett’s tribute to Munger and their lifelong partnership, which was tear jerking. Then, Buffett brought everyone a second unforgettable moment, which was both heartbreaking and slightly humorous. After answering questions, Buffett habitually turned to the left and shouted ‘Charlie’ because it had always been his habit. In the past 50 years, every time he answered, he would say ‘Charlie’.” After the question, they will all call Charlie, and then Mung will make some supplements. But this time Mung is not here. So Buffett said, “Oh my, I’ve done this many times already.” Tilson said that although one person is missing now, he sees it as a tribute to Munger’s life.

In addition to the conference venue, tribute to Munger is reflected in all aspects. During the shareholder shopping day event held during the shareholder meeting, in addition to the candy, clothes, and toys with Munger portraits visible everywhere, the display of books was also touching. As the only booth on site that is not a Berkshire subsidiary, Bookworm, which usually sells a series of books, has only sold one book, Poor Charlie’s Encyclopedia, this year. Although Buffett still recommended a reading list for this year, booth staff told First Financial that Buffett only designated this book for sale this year to commemorate Munger.

Don’t pretend to understand when investing

With the deepening of the value investment concept, investors have been increasingly concerned about Berkshire’s cash reserves and position changes in recent years, seeking the latest views of the “stock god” on market opportunities.

It is worth noting that Berkshire’s cash reserves exceeded $180 billion in the previous quarter, setting a new historical high. “I think this is a reasonable assumption that by the end of this quarter, it could reach around $200 billion. I don’t think anyone sitting at this table knows how to effectively use it, so we don’t use it,” Buffett said.

Controlling risk remains crucial, “having a large amount of cash reserves is a good thing when problems arise. Under current conditions, I don’t mind establishing a cash position at all. When I examine other options, availability in the stock market, and the composition of what is happening around the world, we find it very attractive.”.

Compared to the fourth quarter of last year, Berkshire continued to significantly reduce its holdings in Apple in the first quarter, with its market value decreasing by 22% month on month to $135.4 billion. Since its first opening in 2015, Buffett has repeatedly praised the leadership and market dominance of this iPhone manufacturer. As the holding weight exceeds 50%, many investors have expressed concerns that Apple’s proportion in Berkshire’s investment portfolio is too large.

When asked why Berkshire is reducing its holdings in Apple, Buffett stated that this is for tax reasons, as investments have yielded substantial returns, rather than any judgment based on his long-term view of the stock. He stated that Cook is the “best partner” after Steve Jobs, and the iPhone may be the greatest product of all time. “Unless there is a dramatic event that truly changes capital allocation, we will consider Apple as our biggest investment,” he said.

For the booming artificial intelligence (AI) in recent years, Berkshire’s holdings have not shown significant changes. Although the stock god admits that he knows nothing about this, it does not mean that this technology is not important. “Last year, I also mentioned that we have already made the elf jump out of the bottle, especially when we invented nuclear weapons before. It is now doing some bad things, and the power of this elf sometimes makes me feel scared, and it can no longer be stuffed back into the bottle. I think AI may be a bit similar, and it has already made it jump out.”

Buffett cited artificial intelligence fraud as an example, stating that this type of fraud scenario is very common in the United States. If this kind of fraud is allowed to spread unchecked, it will become the fastest growing industry in history. Buffett added, “I do believe that it has enormous potential for benefits and enormous potential for harm – I just don’t know the outcome.”

When reviewing past investment judgments, Buffett admitted that he and Munger must have missed some investment opportunities over the years. “We missed a lot of things, and what we truly regret is missing some very important things. We never worry about things we don’t know.” Buffett said, “Why do we need to predict the future of every business, just like we can predict wheat production next year?”

Compared to Buffett’s warning, his ignorance of AI has also resonated with investors present. Guy Spier, founder of Aquamarine Fund, told First Financial, “I won’t pretend to understand AI, nor will I pretend to my investors that I understand it.”

This also explains the view of the “stock god” that Berkshire’s main investment target is in the United States. He specifically named Coca Cola and American Express, both of which are classic examples of value investing and long-term holding. Buffett said that companies like American Express or Coca Cola, which have businesses worldwide, are difficult to find elsewhere, and if they insist on investing in the United States, they are unlikely to make significant mistakes. “I understand the rules, weaknesses, strengths of the United States, and my understanding of other cultures is not very good. But fortunately, I don’t have to do this,” he said

Still unsatisfied, waiting patiently for next year

The 6-hour shareholder meeting was fleeting, and compared to last year, Buffett only answered nearly 40 questions this time, which clearly did not fully satisfy everyone’s curiosity.

For example, since the third quarter of last year, the “mysterious” company that Buffett invested in has never appeared. With the permission of the US Securities and Exchange Commission, Berkshire can still temporarily keep this shareholding confidential, and there are various speculations in the market about this lucky company.

“We still don’t know what this mysterious financial stock Berkshire has recently purchased.” James Early, chief investment officer of BBAE, a new American Internet securities firm, told CBI, “In fact, I think Buffett talked about the details of his portfolio at this meeting much less than before. In addition, his attitude towards Apple shares is also somewhat contradictory, and he would rather sell some Apple shares now and pay a 21% tax. Even so, Buffett still retains 87% of Berkshire’s Apple positions.”

The good news is that Buffett revealed that he has no plans to retire, “I feel great.” However, age issues cannot be avoided. “We will see how the next management at Berkshire will play a role,” he added. “We have solved the problems for the next 20 years. If something happens to us, Abel will tell the directors what to do.”

According to the guidelines released on Berkshire’s official website, the 2025 shareholder meeting will be held on May 3rd. Buffett said that he hopes everyone will come to the conference again next year, and he also hopes that he can come again next year.

After the shareholders’ meeting, I walked out of the venue and found that the sky was clear for thousands of miles. A writer once said that participating in a series of activities at Berkshire’s annual convention weekend can be addictive and could change your life.