May 6th, 2023, marked the 50th year that Berkshire Hathaway (BRK) has held its annual meeting for shareholders, and yours truly was in attendance. For value investors this event is like the visit to their Mecca! (Incidentally, the street where the meeting was held is called Meca drive). The pre-event (shopping/exhibition), the shareholders meeting and the energy in Omaha, surpassed all my expectations, it was surreal!
Below are my key take aways from the meeting
BRK’s operating earnings for 2022 were ~$30B, Buffet expects that this number will continue to grow at a moderate pace into the future (vs the higher growth rate in the past). The operating earning are retained by BRK hence will continue to grow in the future.
BRK’s shareholders equity is ~$504B, the largest of any company in the U.S. – this is a function of Buffett retaining the earnings over a long period of time.
Cash and Treasury Bills on the balance sheet stands strong at $130B and earning 4%-5%! (Given all the Fed rate hikes)
Just this past quarter BRK bought back $4.4B worth of its own stock, a sign that Buffett feels the stock is undervalued. The number of outstanding A shares has reduced to ~1.45 million (March 31st, 2023) vs. ~1.6 million in 2019. As the share count reduces the percentage of ownership goes up for each shareholder, and it is accretive to earnings.
Successful investing is about using a sound framework – buy companies you understand, purchase stocks when the market is behaving stupidly and hold those stocks for a long time.
Berkshire Hathaway will do well decades after Warren and Charlie are not around. It is an exceptional company with a great culture and phenomenal businesses (and stock holdings) that make everything from toys to transmission lines.
Berkshire Mangers were surprised by the rate of slowdown in economic activity this past quarter. Buffett himself did not seem too sanguine about the economic prospects, as compared to the past decade.
Consternation over the U.S. fiscal situation from the shareholders - this manifested in three ways during the Question and Answers (QnA) session --
What will be the impact to Berkshire if the U.S. Dollar is no longer the reserve currency?
How do you feel about the enormity of the Fed’s balance sheet ?
Concerns about debt ceiling not being raised on time?
To paraphrase Buffet’s response - the U.S. should be careful and not test the patience of the rest of the world with all the money printing. The federal reserve is fighting the battle alone and help is needed on the fiscal side from Congress. Buffett felt that the U.S. will not default on its debt payment and the debt ceiling will be raised.
Lastly, a memorable quote from Buffett – “Write your obituary and live up to it.”
Other highlights
The Movie: As is customary, the meeting began with a “homemade” Berkshire Hathaway movie, which is something you can only view at the meeting (any attempt at recording will get you kicked-out). In this short movie, Buffett seeks Jamie Lee Curtis’s help to convince Charlie Munger into buying internet stocks, it was simply hilarious! Warren and Charlie would do well in a sitcom.
The movie breaks are interspersed with advertisements of Berkshire companies and stock holdings (Apple, Coke, Geico, Brooks and so on), along with a series of historical QnA from shareholder meetings – this time the theme was a curation of comments by Buffett on succession at BRK, all the way from 1995 to 2016. It was their way of reassuring the shareholders and putting this question to rest.
The shopping/exhibition event: This occurs the day before the meeting and is a fantastic way to experience the value provided by Berkshire’s various holding companies. From (See’s) candies to shoes (Brooks) to RVs (Forest River) and private Jets, as Buffett put it - BRK is a national treasure.
The shareholders: One item that does not get enough attention - the diversity of the BRK shareholder base. Not only in geography but in demographics. Folks from Asia to Africa and demographics from young kids to senior citizens and everyone in between. It is a telltale that the shareholders are treated right, and that Buffett’s investing principles transcend boundaries! The sense of inclusion and camaraderie in the crowd is amazing. Value investing greats such as Mohnish Pabrai and Guy Spier, were so generous with their words and obliging to pictures!
I will leave you with some pictures below, click on them to expand and scroll through. Feel free to email me if you want to hear more about the annual meeting. Cheers!
Disclosure:
This blog was written by Adarsh Shyamsundar, Owner & Financial Advisor, Polaris Capital Management, LLC, a Financial Advisory firm based out of El Dorado Hills, California.
No part of this blog should be treated as financial advice. Please refer to a financial advisor/fiduciary for any actions regarding investing on any equities mentioned in this article. Adarsh Shyamsundar and/or Polaris Capital Management have positions in the securities mentioned in this article