Buffett’s Berkshire is anything but Brittle

Warren Buffett recently returned to the stage in Omaha for the Berkshire Hathaway annual meeting after a two-year hiatus.  Christopher Rossbach, our chief investment officer, who has been making the yearly pilgrimage since 2014 was one of the thousands to attend.  He found the legendary investor in great form and emerged with several key takeaways.

It was great to be back in Omaha, Nebraska for the first in-person Berkshire Hathaway annual meeting since 2019.  I had wondered:  Would it be the same and would the crowds return?

After all, every year, the Woodstock of Capitalism is attended by tens of thousands of people from all over the world.  They come to hear from Warren Buffett and Charlie Munger, who have built Berkshire Hathaway into one of the most valuable companies in the world.  The Stern family has been invested in Berkshire Hathaway for decades.  It is an annual trip I have taken until the pandemic stopped it two years ago and it is the only ‘industry convention’ I attend. 

It is a spectacularly unique event.  Nobody gets a reserved seat.  The person next to you in line at 5 o’clock in the morning can be a retired teacher who has invested in Berkshire all their life, a well-known fund manager, or the CEO of a major business.  Many are long-term investors like me who come to meet like-minded people from all over the world and participate in the many investment conferences and side-line discussions. 

It is also the only shareholder meeting that pays for itself because shareholders get nothing for free. The shareholder’s pass on a lanyard entitles you to discounts to buy products from the many companies Berkshire owns, whether it be Brooks shoes, Fruit of the Loom t-shirts, See’s Candies or Geico car insurance.  Buffett and Munger munch their way through a box of See’s Peanut Brittle as they sit on stage answering questions for hours, so it must be good for your investments. 

1. Berkshire Hathaway and its businesses continue to thrive

The crowds did indeed return.  Some 40,000 people came this year and the auditorium was packed.  Buffett at 91 and Charlie Munger at 98 were in great form.  Berkshire, its companies and its business model are thriving.  Much of this success is because Buffett and Munger keep on adapting what they do to the opportunities and circumstances they encounter while staying true to their principles of long-term, fundamental investing. 

They do it at their own pace and admit that they have missed opportunities because they still have lots of businesses in their box labelled ‘too hard’.  But Berkshire has generated huge value for shareholders by continually generating cash to reinvest and by buying big positions in stocks or even entire businesses like Allegheny, the insurance company it bought earlier this year in a USD $12 billion deal.

That transaction was part of the USD $51 billion of Berkshire’s cash pile that Buffett has deployed so far this year.  He has been using the recent fall back in stocks to buy and it is striking that Buffett has put so much money to work this year given that he hesitated in March 2020 at the height of the uncertainty about the pandemic.  He and his Berkshire colleagues Ted Wechsler and Todd Combs recognise the opportunities for long-term value thrown up by the current market turmoil. 

Other investments so far this year have included lifting their stake in oil producer Occidental Petroleum to over 15%, and as he told the annual meeting, a personal decision to increase Berkshire’s position in gaming company Activision Blizzard after the Microsoft deal to 9.5% or more.  It is remarkable that at his age, Buffett cannot resist a risk arbitrage play, telling shareholders that “occasionally I’ll see an arbitrage deal and do it”. 

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