Betting the Drugstore on Berkshire


We recently returned from our annual trip to the Berkshire Hathaway annual meeting in Omaha, Nebraska, with the same renewed enthusiasm and conviction in investing in quality and value for the long-term that we always have after the event.
Our admiration for Warren Buffett and Charlie Munger, however, does not mean we never disagree with some of their investments. Apple is a case in point. It is now Berkshire’s single largest equity holding, representing $42 billion out of a total of $175 billion of liquid securities. Buffett and Munger have been grappling with the technology companies and their implications for the past several years and it has been fascinating to witness their learnings in real time.
Our approached to investing is based more on Philip Fisher than Benjamin Graham, and we have long argued that the digital transformation stocks are entirely fundamental to the global economy and society as a whole. In our portfolios we believe we have an opportunity to buy some of these great companies now and to hold them for the long-term. It has been two years since Buffett and Munger started buying Apple, at a great price as it turned out, but we wrote in the Financial Times back then that it was the wrong play. Instead we argued Amazon, Alphabet and Facebook were much stronger digital companies, with growth that looked more sustainable than that of Apple. As Amazon and Alphabet continue to expand their businesses, and improve services, they are likely to do better than Apple over our long-term holding period of five to ten years and beyond. Berkshire’s incremental purchases have pushed us to think again about the the argument, which we were able to publish again in the FT.
Our insight this month provides some further reflections on our trip to Omaha and includes the article in the FT.

Betting the Drugstore on Berkshire

Driving to Omaha from Kansas City recently was a poignant reminder of the natural resources and enterprise that form the basis for the prosperity the US has achieved. The highlight was stopping en route at the aptly named Stoner Drug Store in Hamburg, Iowa. Founded by Crosby Stoner in 1896, it is now a small chain of drugstores spread across the region. We sat at the soda fountain of this classic American drugstore and chatted to one of the pharmacists. Having told him we were heading to Omaha for the Berkshire Hathaway annual meeting he mentioned that their employee profit sharing fund had been invested with Warren Buffett and his team for a long time.

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