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Here’s a pick of what Warrenn Buffett had to say over the weekend, and his annual ‘Woodstock for Capitalists’.
Saturday saw the staging of ‘Woodstock for Capitalist’, as the AGM of Berkshire Hathaway is popularly known.
BH is an NYSE-listed firm with insurance at its core, in which 36.8 per cent of the stock is held by Buffett, and which has on its $700 billion balance sheet investments in companies as diverse as Coca-Cola, American Express, Apple, Bank of America, and many others. Berkshire’s equity portfolio in 201y amounted to a whopping $170 billion.
More than its equity holdings, what Berkshire under Buffett is known for is the enormous wealth it has generated for its investors. In the 50-odd years since Buffett acquired it, it has netted a 22,000 time expansion in profits and 4800 times growth in revenue. Over these five decades, the Berkshire stock has consistently delivered 19.1 percent return, which is double the US market. One Berkshire share, which cost $19 before Buffett entered the firm, now trades at over $300,000 now.
Given his ability to spot winning businesses, and buy into them at bargain prices, the annual meeting held in Ohama, Nebraska, is a standing room only event, where Buffett and Charles Munger, vice chairman of Berkshire, address shareholders and share their collective investing wisdom.
Last weekend was no different, with the duo taking questions from some 42,000 shareholders, analysts and journalists for over five hours, offering them a glimpse into the genius mind that has made millions of dollars for investors.
Here’s a pick of Buffett, toasted as the ‘Oracle of Omaha’, had to say.
On missing out on Amazon
“I made the wrong decision on Google and Amazon.”
“The truth is that I’ve watched Amazon from the start, and I think what Jeff Bezos has done is something close to a miracle. The problem is if I think something will be a miracle, I tend not to bet on it. Bill Gates told me early on (to look at) Google...”
Incidentally, Buffett also did not invest in Microsoft, which he attributed in the earlier years to “stupidity”, and later to his friendship with Gates and the “inference” that could be drawn if he were to invest in MS.
“I’ll miss a lot of things that I don’t feel I understand well enough, and there is no penalty in investing if you don’t swing at a ball that’s in the strike zone, as long as you swing at something at some point ... We’ll try to stay within our circle of competence, and Charlie and I generally agree on where that circle ends ... We’ll try to stay within our circle of competence ... We’re going to miss a lot of things.”
The fact is, though, he didn’t totally miss out on Apple’s success story, since investing in the stock only two years ago, but then he didn’t look at it as tech stock. “I went into Apple because I came to certain conclusions about the value with which the capital was being deployed and about the ecosystem.”
Why cryptocurrency is bad
Answering an attendee from Ukraine, Buffett said, “Cryptocurrencies will come to bad endings.”
Cryptocurrencies are non-productive assets. It essentially will not deliver anything other than supposed scarcity. What does it produce itself? ... Anytime you buy non-productive assets, you are counting on someone later on buying a non-productive asset. It does come to a bad ending...”
They also “attract a lot of charlatans” and “people of less than stellar character,” he added for good measure.
China-US standoff
This was perhaps the most anticipated response, given its global implications, and Buffett didn’t let anyone down with his response.
“The United States and China are going to be the two superpowers of the world, economically and in other ways for a long, long, long time. We have a lot of common interests and like any two big economic entities there are times when there will be tensions. But it is a win-win situation when the world trades.”
“I don’t think either will dig themselves into something that precipitates and continues any real trade war ... The benefits of trade are basically not visible. No one thinks about benefits day by day ... The negatives, and there are negatives, are very apparent and very painful.”
Newspapers in crisis
“Where the daily newspaper was a primary (source of information), they’re no longer primary.”
“No one except The Wall Street Journal, The New York Times and (now) The Washington Post has come up with a digital product that will in a significant way replace the revenue being lost as print newspapers lose circulation and advertising ... the Journal, the Times and probably the Post have an economically viable model in the digital world.”
Gun control in his companies
“I do not believe on imposing my political opinions on the activities of our businesses.”
“If you get into which of our companies are pure and which ones aren’t pure, I think it will be very difficult.”
Buying outside US
“Outside the United States ... we are not embedded in (sellers’) minds in the same way. We are on the radar screen big-time in the United States ... I hope tomorrow I’ll get a call from Germany or Britain ... or Australia ... and we’ll get an opportunity.”
“In terms of getting a lot of money into something, many billions ... that can be tougher in markets that you’re unfamiliar working in. Accumulating a $6 or $8 or $10 billion position outside the United States can be very difficult.”
Wells Fargo fraud accounts scandal
On the creation of millions of fraudulent savings and checking accounts by the bank’s employees, Buffett was charitable.
“We know people are doing something wrong as we sit here at Berkshire. You can’t have 370,000 employees and expect that everyone is behaving like Ben Franklin.”
“Wells Fargo is a company that proved the efficacy of incentives, and it’s just that they just had the wrong incentives. The fact that you are going to have problems at some large institutions is not unique.”
Is Buffett semi-retired?
This was the question that kicked off the Q and A session, to which the billionaire investor replied with a chuckle, “I have been semi-retired for decades.”
The fact is, some of Buffett’s investing duties have been handed over to Berkshire portfolio managers Ted Weschler and Todd Combs, while the company’s business is being overseen by Gregory E Abel and Ajit Jain.
“Ted and Todd each manage about 12 or 13 billion,” Buffett said in his reply. “Together that’s $25 billion. They’re managing $25 billion and doing a very good job.”
Of course, he didn’t forget to add: “I still have the responsibility for the other $300 billion.”
Photographs: Rick Wilking/Reuters.