Quality Prevails

Quality Prevails

This month marked a historic Berkshire Hathaway annual meeting.  It was a celebration of Charlie Munger’s legacy, Berkshire’s record of creating a company with US$897bn of market value and US$578bn of shareholders’ equity, and all that Berkshire stands for.  Only in Omaha can you meet and learn from so many like-minded investors from all over the world. 

Berkshire is at a point of transition and Warren Buffett told us that Greg Abel, the next CEO, will be in charge not just of Berkshire’s operating businesses but of all capital allocation, including its large public equity holdings.  In recent weeks Eric Platt at the Financial Times has written an important series of articles on Berkshire and the issues it faces and our CIO Christopher Rossbach said to him that it will be important to hear from Greg Abel how he thinks about stocks and how he will manage Berkshire’s public equities.  The articles look to understand the public equity portfolio and to assign the different positions at different times to the people responsible. The methodology is clear and it will be interesting to see if there is feedback from people who are close to Berkshire or perhaps from some of the people involved themselves if there are issues to correct about the analysis or record. 

As investors we have to subject ourselves to rigorous analysis to justify the value we create.  That is why we are pleased that we have been able to add significant value through the World Stars Global Equity strategy we have managed since 2012 and in particular since the pandemic in 2020. It is now rated five stars on Morningstar and top decile on several investment platforms comparing us to similar funds over the past 10 years to 30th April 2024. We are proud of this achievement and wanted to highlight it because it also adds legitimacy to the investment opinions we express. 

Warren Buffett’s great pride in Berkshire’s value creation and the generosity of its shareholders was apparent in his tribute to Sandy and Ruth Gottesman. Warren played the extraordinarily moving video of Ruth Gottesman announcing her US$1bn gift to Albert Einstein College of Medicine, a leading independent medical school in New York City.  The gift had two stipulations: (i) that it would be used to fund free tuition for all medical students and (ii) that Albert Einstein should keep its name.  The students’ reaction said it all. 

As the inevitable transition nears, those who care about long-term investing have the responsibility to keep going the idea and principles that Warren Buffett and Charlie Munger have expressed and that have inspired generations of investors.  Of course, we may wish for greater transparency and await greater clarity about the way ahead. However, just as Warren Buffett has said that price is what you pay, value is what you get, it is also true that you only get out what you put in. Defining and explaining investment principles, challenging them and adapting them to try to understand and make the most of the opportunities we have is both Warren Buffett’s and Charlie Munger’s greatest legacy and the best way in which we can pay tribute to them.  

As we outline below, markets pulled back in the past month because growth and inflation came in higher than expected.  We expected this kind of move both last year and this year.  Underlying economic growth is robust and inflation is sustained. In their first quarter results the large majority of our companies reported strong growth in sales, earnings and cash flows and we believe they are well positioned for the future and the sell-off was driven by such short-term trading that it has already reversed.  

Read the full article here 

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