The Berkshire Hathaway annual meeting in Omaha, Nebraska, the Woodstock of Capitalism, is the one ‘industry convention’ we attend. Berkshire’s business comprise almost all of US economic activity so it provides an important perspective on how things are going. Especially given the chaotic political issues we face in the US, Europe and elsewhere it was reassuring to hear that many if not most if them are doing very well and are hiring and investing in their businesses. It was also uplifting and inspirational to hear Warren Buffett and Charlie Munger talking about their investment convictions and how to learn and grow as investors and people.
The two of them have built Berkshire into one of the most valuable companies in the world. Part of their success is due to the fact that they keep on adapting what they do to the opportunities and circumstances they encounter.
One of our insights over the past ten years is that digital transformation is a key driver of economic growth and innovation, and a tremendous opportunity to participate in the value created by its most successful leading businesses. We have argued that they their competitive advantages and moats are every bit as strong as those of other more traditional businesses.
For many years Buffett and Munger kept these stocks in famous box on Warren’s desk that is labelled ‘too hard’. Berkshire’s investment managers then bought an initial position in Apple, which has grown into Berkshire’s single largest equity positions. When Buffett announced the stake last year, we wrote in the Financial Times that he had thought the wrong company and that Apple would be a value trap over time compared to the great platform companies like Alphabet, Amazon or Facebook.
This year Buffett announced that Berkshire had bought a stake in Amazon. He distanced himself by saying it was not him but either Todd or Ted, the professional investors working alongside Buffett to manage Berkshire’s portfolio. They clearly see significant upside in Amazon as we have for years. That is how he started to invest in Apple. Berkshire and Amazon are both singular businesses that are much more similar than most people think, and we would not be surprised at all to see Alphabet joining Amazon and both of them becoming a core holding for Berkshire in due course.